'A wild future': How economists are handling AI uncertainty in forecasts

"The core challenge is estimating the relationship between AI and productivity, says Erik Lundh of The Conference Board. Economists have time-tested models for projecting economic growth. But they've seen nothing like AI, which is a wild card complicating traditional economic playbooks. Some facts are clear: AI will make humans more productive and increase economic activity, with spillover effects on spending and employment."

"AI also complicates capital expenditure projections. Heavy money is going into data centers and power plants, but how much this will translate into productivity gains - and thus whether demand for AI services will remain high - remains unclear. Economists are weighing the likelihood of a slowdown in the US and global economy against the productivity gains AI is expected to bring."

AI promises higher human productivity and broader economic activity with spending and employment spillovers, but it presents fundamental measurement challenges for economists. Time-tested growth models struggle to isolate AI's effects on labor and to predict long-term job displacement, especially in manufacturing. Large capital investments in data centers and power infrastructure complicate forecasts because the link from those expenditures to sustained productivity gains and persistent demand for AI services remains uncertain. Forecasters weigh potential near-term global slowdowns against AI-driven productivity boosts; projected US GDP growth is lower than prior decades, with AI expected to partially offset that decline.

Read at Computerworld