Mark, it's great to have you. And there's, of course, some great anecdotal evidence to be had in Fed minutes, as well as the Fed's Beige Book. And I'm wondering, because it's been a while since we've had a chance to talk with you, how you describe this moment in our economy and how the president should state next week. The state of our union is what?
Oh, well, fortunately, I'm not president, Joe. That's a tough one. Well, good luck with that, you know. You know, my sense of the economy is it would depend on which part of the elephant you touch. I mean, you look at GDP today, of all the things that we produce, it looks okay. You know, we're going to get a read on that for the fourth quarter on Friday, probably come in around two and a half percent, which is kind of right down the strike zone that's close to the economy's potential. But if you look at jobs, we're not creating very many, and it feels like that's even before artificial intelligence kicks into any kind of gear here in terms of productivity gains. So as we see more of that going forward, I heard you talking about that just now, that it's coming, we might see some job loss. So, you know, I think it depends on where you're looking. But, you know, you add it all up, mix it all together, you know? But it's okay. We're hanging in there.
It just feels fragile to me. Well, on the question, this is actually something that Bloomberg Technology host Ed Ludlow posed to the San Francisco Fed president Mary Daly yesterday. Mark, this is what she told him, and then we'll have you respond.
What we're looking for is a technology to give us consistently good changes in productivity so that all industries at scale get better. Industries figure out new ways to generate revenue, new ways to do product design, new ideas to come and shape the economy. That's the thing that has a sustained productivity growth path. So it's undeniable productivity growth has gone up. What's not clear is how long will that last?
So she speaks to the lack of clarity, the uncertainty around this question. Mark, how long is it going to take to feel the real effects? Are we talking about, with the pace of the development of artificial intelligence in our models, that this could be within the span of months potentially? Are we talking years? Is Kevin Warsh immediately going to have to answer this question when he gets to the Fed if he's confirmed?
Well, it feels like AI and its impacts on productivity growth are early stages. You know, you can kind of sort of feel it in the economy over the past year. You can see it in hiring rates. They're weak. You can clearly see it in the tech sector, you know, tech jobs are falling, and that's there. Tech is on the front line of, you know, the impacts of AI. There's been some research that kind of sort of connects the dots. So it feels like it's starting to kick in. But, you know, just listening to the technologists and seeing the improvements in the power of these large models and the use of agents, it feels like we're going to get a much more significant increase in productivity growth here now going forward, you know. You know, it feels like underlying productivity growth right now, that's non-farm business productivity growth, is probably about 2%, which is close to the long run average. But if you told me, you know, we had this conversation a year from now, it's two and a quarter, two and a half, I'd say that sounds about right to me. So I think we're on the leading edge of that. And Kelly, this goes back to the point I was making earlier. You know, we're not creating any jobs now at 2% productivity growth. What happens if we get to two and a quarter, two and a half percent over the next year? You know, will we see, you know, enough demand for other things to create enough jobs to keep unemployment down? Or are we going to start to see some job loss here? Maybe I can help to loosen up the housing market at some point?
Mark Zandi, because there are big questions about where we're going with housing. The president is worried that lowering housing prices will ruin people's nest eggs, and Congress is busy trying to increase not only affordability, but inventory, is something that we talked to Congressman Mike Flood about. The Republican from Nebraska helped to author a housing bill that just recently passed. In fact, he remarks on how popular this was on Capitol Hill. Listen.
390 votes. Nine no votes. I mean, that is something to celebrate. Unfortunately, it doesn't make the news anywhere on an issue that matters: housing. The good news is in the Senate, they have a near unanimous bill that they've moved to the floor and tried to pass before. And you've got the president who has ideas about housing. So here we have House Republicans and Democrats, Senate Republicans and Democrats, and the president all saying housing is a priority. If we can't find a deal among those three entities, there's not a deal to be had.
