Artificial Intelligence, Structural Shifts, and Monetary Policy

December 3, 2025, Presentation: The U.S. economy is at the threshold of a profound structural transformation. Artificial Intelligence (AI) has the hallmarks of a general-purpose technology capable of lifting productivity growth for a decade or more. While diffusion is in early stages, the promise of AI is already altering capital allocation and the relationship between growth and employment. Conceptualizing the AI boom in terms of capital-based unbalanced growth can help to explain recent jobless growth and the crowding out of investment in non-AI sectors. In a capital-based unbalanced growth framework, the elevated demand for capital in the leading AI sector raises financing costs and crowds out investment in other sectors, especially capital-intensive non-AI sectors such as manufacturing. This AI investment drives strong growth that is jobless in the early stage because AI frontier firms do not scale up their workforces proportionately, and other firms postpone hiring due to AI uncertainty."