Workers are taking home a smaller slice of the U.S. economy than at any point since the government began tracking the measure in 1947, and that is happening even before artificial intelligence has meaningfully lifted productivity. Labor's share of national income slipped to 52.8% of GDP last quarter, the lowest level on record.
At the same time, corporate profit margins climbed to a record 14.9% of GDP, widening the gap between what companies are keeping and what employees are earning.
The divide shows up in how the economy grew last quarter. Overall growth came in at 1.7%, but total working hours rose just 0.3%, meaning most of the gain came from output per hour rather than more people working more. Compensation rose 2.6% over the same period, which economists describe as flat or even slightly shrinking once inflation is factored in.
A large part of the current investment boom is also showing up as imports rather than domestic production. Server imports tied to AI infrastructure hit an annualized pace of roughly $450 billion last month, up sharply from about $50 billion a year as recently as 2023, according to an analysis of trade data by economist Joseph Politano. Because that spending flows overseas to hardware makers, it does not translate directly into domestic output, which some economists say helps explain why hiring has stayed soft even as corporate profits climb. Separate estimates project total data center investment could reach $31 trillion by 2050.
Treasury Secretary Scott Bessent and Federal Reserve Chair Kevin Warsh have both pointed to AI as a source of future deflationary growth, arguing that productivity gains from the technology will eventually spread more broadly across the economy. Other economists, including EY Parthenon chief economist Gregory Daco, caution that the productivity gains seen so far are coming mainly from automation and heavy capital spending rather than AI itself, and that past technological shifts have tended to concentrate early gains among large firms with no guarantee that wages follow.
Former Wall Street Journal reporter Jon Hilsenrath has pointed to the widening gap between corporate profits and worker pay as one of the central questions hanging over the economy as AI investment continues to accelerate.