AI, not Trump, is the big mover of the economy, this analyst says - and it's just going to get bigger

This photograph shows the face of President Donald Trump displayed on Robert the Robot, an advanced conversational humanoid. The robot was featured during the AI for Good Global Summit in Geneva on July 7.

What was once considered unthinkable is now a reality: The U.S. economy is growing strongly even though it's creating very few new jobs.

To Gad Levanon, this is not a surprise. Levanon, chief economist of the labor research firm Burning Glass Institute, said robust economic growth and low hiring makes perfect sense in a period of fast-rising productivity.

Workers are more productive when they produce more good and services in an hour than they did the year before - and the year before that, and so on. When current workers are more productive, companies don't need to hire as many new employees to keep up with customer demand.

What's behind the boom in productivity? Levanon said he can't prove it yet, but he's convinced it's the lightening speed and adoption of artificial intelligence.

Here are five ways Levanon said AI is quickly remaking the U.S. economy - and which workers it helps and hurts the most.

Economic and stock boom

The boom in AI investment, along with consumer spending, have been the two biggest drivers of the economy in the past few years. Companies are pouring billions of dollars into the technology, sparking a revival among slumping American manufacturers.

The investments are already paying off, Levanon contends.

Businesses are using AI to reduce labor and other expenses and to generate record profit margins that seem bulletproof. Higher profits, in turn, have fueled a record stock-market boom that's created a wave of 401(k) millionaires.

"People who were invested made a lot of money," Levanon said in an interview with MarketWatch. "That's why they are spending so much. It's all AI investment and market value."

No boom is without is excesses. Many companies act more irresponsibly during frothy times, he noted, laying the seeds for the next recession.

How far off is that? Levanon thinks the boom could go on for years, since the AI revolution is still in its early stages.

Trumping President Trump

The AI surge came at a fortunate time. All the investment has offset the damage caused to the economy by the Trump tariffs, the conflict with Iran, rising gas prices and the re-emergence of high inflation.

"This has been my motto for the past year," Levanon said. "It's not Trump. It's AI [that's the big story].

"All the damage Trump is causing is smaller than the benefits of AI," Levanon went on. "There are thousands of AI startups. There is a huge investment boom. The valuation of companies are soaring."

But what about jobs?

All the new companies and all the new energy in business hasn't translated into a lot more hiring - and Levanon doesn't think it will.

How come? Businesses can use AI to do more of the work of humans, especially in entry-level jobs that require less judgment and responsibility.

"I think it is a big problem for individuals, not for companies," he said.

Many young workers, in particular, will need to take jobs at less prestigious companies or choose lower-level occupations that were not their first choice, simply to get their foot in the door.

Levanon himself said he "can't imagine" hiring a research assistant or young economist on his staff, given how useful AI has become.

"I think young people are in a difficult labor market now. That is something that will continue," he said.

Older workers still can thrive

Younger employees have always been viewed as more adaptable to change than older employees, and better suited to working with emerging technologies. Levanon said AI flips that idea on its head.

"One of the great things about using AI is you don't need to know much," he said. "It's not complicated to use it. You just tell it what you want."

Older workers could turn out to be more valuable than younger ones, he said, by meshing their experience with the tools of artificial intelligence.

Some jobs of older high-level workers might still be in danger, though.

Levanon said he used to think physical, blue-collar work was less susceptible to AI than office work. He's no longer sure he believes that.

"Robotics are going to come faster than people think [to the factory floor]," he said.

Dawn of the revolution

Until a few years ago, Levanon was a longtime skeptic of the idea that transformative technologies would sharply boost productivity and speed up the long-term growth of the U.S. economy.

His eureka moment came nearly four years ago, when ChatGPT was made available to the public on Nov. 30, 2022.

"As soon as I started playing [with] Chat GPT early on, I had a very strong hunch it would be a big deal," Levanon said. "I completely shifted my view on fast productivity growth."

What was the big deal? AI allowed Levanon to obtain information faster and in more organized form. He could also use AI to analyze his research and project future outcomes, all in just moments of time.

"It's not just how good it is," he said. "It's getting better and better and better, and not making mistakes.

"It hard to imagine how something so powerful won't have a big effect," he added.

-Jeffry Bartash