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So here's the latest. This morning, US productivity accelerating at his fastest placed in two years, fueling hopes for further AI driven gains. Norian Rabini is the chairman of Rabbini Macro associate to me, writes the following, The US remains at the center of a technology driven positive supply shock, the racist growth and lowest inflation over time. No real joint is now for more, no real good morning, good to see you, great, seeing you fantastically catch up with you, sir.
You're bullish, not just for the year ahead, but three to twenty thirty. Can you flash that out for us a little bit more?
Yes, I mean everybody's talking about Ai jen Ai, but this is only one of the fifteen technology of the future. They're all rated to AI. But is AI semiconductor, by medical research, quantum infusion, the fans, tech, fintech, new material signs, you name it, and it's there is between US and China. I don't think it's a zero sum game. US is
going to do China's going to do well. But my estimate is that the US potential growth is estimated today to be only one point eighty percent could be as I as four percent by the end of the decade. And I've done a bit of a bottom up analysis. And by the way, the data productivity after the GFC average productivity between two thousand and nine and nineteen was only one percent. Since twenty nineteen, in spite of the
deep during COVID, has doubled to almost two percent. One point nine in twenty twenty four was two point four percent, and the number from Q three suggests was almost five percent. And by the way, the Atlanta Fed no cast for Q four GDPs today is five point one percent. Probably too high, but given that one, given the job number, you ele have another high productivity growth. Now, I don't think the PRODUCTI growth is four percent or five percent, but there's definitely acceleration.
Jobs is key. Is a jobless growth so called jobless growth?
Yeah, well, it's a jobless growth. There are three stories. One is that the GDP number are wrong and the GDP number are going to be revised towards the weaker labor numbers. The other one is that now the gp groad is strong and you're going to have some adjustment upard of the revised data. I think the third explanation is the more correct one. You can have strong GDP growth and having weak labor growth because we're having a
productivity revolution. If you're looking, for example, at the revenue or real revenue per worker of SMP five hundred firms since the launch of chad GPT in November twenty twenty two, the average has increased for SMP five hundred firms by fifteen percent in the last three years, so it's almost five percent per year. And if you look at the bi sector, of course a lot of it is closer to twenty percent in tech and communications services, but it's
very large also across the board. So both at the micro data level SMP five firms and a macro one number, we're seeing a productive revolution. Lad in the numbers.
I'm kind of dealing with whiplash right now because we just had the Roy Mettel CEO on defense sector in Europe booming for all the wrong reasons, this idea that he's more worried about the state of the world ever before, and here doctor doom is coming on to tell us about how productivity boom is going to bring everything to a better place. Why are you less concerned about this overlay of rearmament and militarization that is also coming in tandem with this productivity boom.
Well, there are geopolitical risk in the world, and I'm aware of them. The question is whether they're going to have a significant economic and market effect. Look at the biggest one, where the twelve day were between Isaly and Iran last June. All prices went up a little bit, stock markets wobbled, and then given the Iran did not attack the old facility of the golfis or block the street of Frmos, it went away and that was a big,
big deal Venezuela. You know, we can discuss the length, but the macro and market implications are close to zero. It's just less than a million barrels a day. Russia Ukraine is a mess, but it's not going to have an impact on global market economy the way it did in twenty twenty two. So and usked China. They are of course in a competitive strategic competition, but right now the trade tension for all the reasons we know, are
somewha limited. So every time there is a geopoligal risk, people say stuff could happen, But so far, those that we've seen in the last few decades, living aside the seventies with the shocks of Yom Kipur and the a Islamic Revolution have not a market effect.
Do you think, though, that the United States is going to lose some of its luster as an investment haven in terms of the ongoing conflict between the US and traditional allies like Europe. I mean, have you seen anything like that or do you think that's oversaid in productivity really is going to rule the roost.
You know, I've been saying since last year that tech trump stariffs, because I think that the upside coming from tech is two hundred business points. Well, if you add all the impacts of the bad circulationary policies of Trump trade, the restrictions of migration, physical depity, trying to affect the independence of the Fed, the rule of law, the maximum from an Empedia point of view, it could be a
negative fifty b these points downside to potential growth. So you have an upside of two hundred from technology, you have a downside of fifty is a ratio four to one, So tech trum starff. So the stuff that this technology is first or everything else including geopolitics is second order?
Is this why the AI trade. The market pretty much shrugged off at independence yesterday as a serious concern.
You know, I believe that you know, there is some fraudiness of course in the AI sector. But if you talk to all these companies, I think that they would all argue that we are maybe to worst five years away or at best three years away from AGI. However you want to define it. Now, if we are achieving artificial general intelligence, the valuation of the say not every of the MAC seven is going to reach AGI, but
maybe three or four will. So the value of affirm that is going to be having AGI is going to be five x of its current value. So that's the RaSE. So if you think of it this way, yeah, there is some fraudiness, there can be a correction. But with US growth at two percent for the last few decades, the average return on smp F abanded was twelve percent including dividends of Nasdaq was sixteen percent, and was with two percent. Suppose growth is not two three, let alone
three and a half four. American exceptionalism has to become even stronger, because if it was American exception it's with one point eight percent growth. With higher growth, it has to be better than that on average. Now there'll be winners and losers, both within the publicly traded firms all the versus new economy, and among the startups. Many of them are going to go bust. But if you're looking at the medium term horizon with higher growth, you're going
to have higher returns. And we're seeing based on the data on real revenue growth for a Segree avand re firms, then most of those productivity grains are gotten by the firms. Real wages are growing less than productivity in liberal costs are falling. That's why there is my least, that's why people are worrying about affordability. But from a profitability point of view, the corporate sector is doing great.
It's a perfect frame again the last year and maybe for the next several year. Neuria, thank you sir, it's good to see you as always. Thank you, Nurian Rabeni There Rabennie Macro Associates