World
Robots and happy workers: Productivity surge helps explain US economy's surprising resilience
WASHINGTON (AP) — Trying to keep up with customer demand, Batesville Tool & Die began seeking 70 people to hire last year. It wasn’t easy. Attracting factory workers to a community of 7,300 in the Indiana countryside was a tough sell, especially having to compete with big-name manufacturers nearby like Honda and Cummins Engine.
Job seekers were scarce.
“You could count on one hand how many people in the town were unemployed,” said Jody Fledderman, the CEO. “It was just crazy.’’
Batesville Tool & Die managed to fill just 40 of its vacancies.
Enter the robots. The company invested in machines that could mimic human workers and in vision systems, which helped its robots “see” what they were doing.
The Batesville experience and others like it have been replicated countlessly across the United States for the past couple of years. Chronic worker shortages have led many companies to invest in machines to do some of the work they can’t find people to do. They’ve also been training the workers they do have to use advanced technology so they can produce more with less.
The result has been an unexpected productivity boom, which helps explain a great economic mystery: How has the world’s largest economy managed to remain so healthy, with brisk growth and low unemployment, despite brutally high interest rates that are intended to tame inflation but that typically cause a recession?
A Halter robot collects a finished piece for blood pressure pumps from a Mazak Integrex at Reata Engineering and Machine Works Thursday, Feb. 15, 2024, in Englewood, Colo. (AP Photo/David Zalubowski)
To economists, strong productivity growth provides an almost magical elixir. When companies roll out more efficient machines or technology, their workers can become more productive: They increase their output per hour. A result is that companies can often boost their profits and raise their employees’ pay without having to jack up prices. Inflation can remain in check.
Austan Goolsbee, president of the Federal Reserve Bank of Chicago, has likened surging productivity to “magic beanstalk beans for the economy. … You can have faster income increases, faster wage growth, faster GDP without generating inflation.’’
Joe Brusuelas, chief economist at the tax and consulting firm RSM, said, “The last time we saw anything like this was the late 1990s.”
That was when a productivity surge — an early payoff from the sudden embrace of laptops, cellphones and the internet — helped allow the Federal Reserve to keep borrowing rates low because inflation remained under control even as the economy and the job market sizzled.
A worker at Reata Engineering and Machine Works programs a Mazak Variaxis machine used to make semiconductor pieces, Thursday, Feb. 15, 2024, in Englewood, Colo. (AP Photo/David Zalubowski)
This time, the Fed’s aggressive streak of rate hikes — 11 of them starting in March 2022 — has managed to help cool inflation from a four-decade high of 9.1% to 3.1% while causing little economic hardship.
“I would have said it’s not possible,’’ said Sal Guatieri, senior economist at BMO Capital Markets. “But that’s exactly what happened.’’
A year ago, nearly every economist was warning that a recession was all but inevitable. Fed Chair Jerome Powell himself warned in 2022 that beating inflation would inflict “some pain” in the form of widespread layoffs and higher unemployment.
By last month, Powell was sounding a different note. With unemployment barely above a half-century low, the Fed chair told reporters, “We’ve had a very strong labor market, and we’ve had inflation coming down.”
He did caution that the central bank wants to see further progress in slowing inflation. Yet the Fed is so optimistic that inflation is heading toward its 2% goal that it hasn’t raised rates since July and is expected to cut rates multiple times this year.
A box of parts for blood plasma pumps sits ready for shipping from Reata Engineering and Machine Works Thursday, Feb. 15, 2024, in Englewood, Colo. (AP Photo/David Zalubowski)
Perhaps the likeliest explanation is the greater efficiencies that companies like Batesville Tool & Die have managed to achieve in the past year or so. Before productivity began its resurgent growth last year, a rule of thumb was that average hourly pay could rise no more than 3.5% annually for inflation to stay within the Fed’s 2% target. That would mean that today’s roughly 4% average annual pay growth would have to shrink. Yet higher productivity has changed that equation: There’s now more leeway for wage growth to stay elevated without igniting inflation.
“A lot of that pressure on business finances — that normally causes them to raise prices — has been offset by strong productivity growth,’’ Guatieri said.
At a news conference this month, Powell was asked whether he believed higher productivity helps explain why the economy has kept growing steadily even while inflation has tumbled.
“That’s one way to look at it — yeah,” Powell replied.
The productivity boom marks a sharp shift from the pre-pandemic years, when annual productivity growth averaged around a tepid 1.5%, according RSM’s calculations. Everything changed as the economy rocketed out of the 2020 pandemic recession with unexpected vigor, and businesses struggled to re-hire the many workers they had shed.
The resulting worker shortage sent wages surging. Inflation jumped, too, as factories and ports buckled under the strain of rising consumer orders. Parts shortages arose.
Desperate, many companies turned to automation. Investment in equipment and in research and development and other forms of intellectual property accelerated. The efficiency payoff began to arrive almost a year ago. Labor productivity rose at a 3.6% annual pace from last April through June, 4.9% from July through September and 3.2% from October through December.
At Reata Engineering & Machine Works, “efficiency was kind of forced on us,’’ CEO Grady Cope said. With the job market roaring, the company, based in Englewood, Colorado, couldn’t hire fast enough. Meantime, its customers were starting to balk at paying higher prices.
Semiconductor pieces sit in a shipping box as they are produced in a Mazak Variaxis machine at Reata Engineering and Machine Works Thursday, Feb. 15, 2024, in Englewood, Colo. (AP Photo/David Zalubowski)
So Reata installed robots and other technology to produce more with less. Software allowed it to automate the delivery of price quotes to customers. That process used to require two weeks. Now, it can be done in 24 hours.
Many economists and business people say they’re hopeful, if not certain, that the productivity boom can continue. Artificial intelligence, they note, is only beginning to penetrate factory floors, warehouses, stores and offices.
“Right now, AI is not a critical enabler for us; it’s an assistant and accelerator in certain roles,’’ said Peter Doyle, CEO of Hirsh Precision, which makes parts for the aerospace and medical device industries. “The world is still trying to understand what AI is capable of doing and how quickly it will advance.’’
The early evidence suggests that AI could sustain the productivity gains. A study last year by Erik Brynjolfsson of Stanford University and Danielle Li and Lindsey Raymond of the Massachusetts Institute of Technology tracked 5,200 customer-support agents at a Fortune 500 company who used a generative AI-based assistant in 2020 and 2021. The AI tool provided suggestions for dealing with customers and links to useful internal documents.
Those using the chatbot were found to be 14% more productive than colleagues who didn’t use the tool. They handled more calls and completed them faster. The biggest gains in productivity — 34% — came from the least-experienced, least-skilled workers.
Automation tends to raise fears that machines will replace human workers and thereby kill jobs. Some workers supplanted by robots do often struggle to find new work and end up settling for lower pay.
Yet history suggests that in the long run, technological improvements actually create more jobs than they destroy. People are needed to build, upgrade, repair and operate sophisticated machines. Some displaced workers are trained to shift into such jobs. And that transition is likely to be eased this time by the retirement of the vast baby boom generation, which is causing labor shortages.
Some of today’s productivity gains may be coming not just from advanced technology but also from more satisfied workers. The tight labor markets of the past three years allowed Americans to change jobs and find others that pay better and make them happier and more productive.
One of them was Justin Thompson, of Kalamazoo, Michigan, who had felt burned out by his job as a police officer, with its 16-hour workdays .
“I was literally running myself into the ground,’’ he said.
Thompson’s wife saw a job posting for operations manager at a charter airline. Even without airline experience, his wife felt he could use skills he gains as a Marine Corps infantryman — handling logistics for missions — during tours in Iraq and Afghanistan.
She was right. Omni Air International hired him in 2019.
Thompson, 43, said he he loves the new job, which allows him to work from home when he’s not traveling. And his Marine experience — which included developing ways to improve efficiency — has proved invaluable. Technology helps, too: Thompson travels with a laptop, iPad and mobile printer and uses proprietary software to manage logistics.
Other workers have switched from low-skill jobs to those that pay better and are more productive.
“The people who were rolling tacos on Dec. 31, 2019 … yeah, they’ve moved up,’’ RSM’s Brusuelas said. “They’re doing other things and making a lot more money.”
At Reata Engineering, staffers were trained to use new sophisticated equipment. One 19-year-old employee, a university engineering student, has used AI tools to make company training materials less cumbersome and time-consuming.
“The whole point is not to lay people off,’’ said Cope, the CEO of Reata Engineering. “The point is to make people do jobs that are more interesting’’ — and pay better, too.
WASHINGTON (AP) — Mark Schiefelbein has been based in Washington, D.C., with AP for about three years, and before that spent a decade in Beijing at AP’s China bureau.
Here’s what he had to say about this extraordinary photo.
Why this photo?
This was an event that had never happened before in the 250-year history of the United States and may never happen again: a night of mixed martial-arts cage match brawls on the South Lawn of the White House, with bloodied competitors battling it out in front of the president, vice president, and other leaders of the country. AP had other photographers ringside at the event focusing more on the fights themselves. So I felt my role was to capture the context of the evening — the location, the people in attendance, the environment.
How I made this photo
A small group of other photographers and I, the White House press pool, had been allowed to photograph part of the evening from a position in the stands directly opposite the White House. I was carrying four cameras with a variety of lenses from 12 mm to 300 mm. This let me capture everything from ultra-wide views of the “claw” structure built for the fights, to close-ups of leaders and celebrities in attendance. I had been following Diego Lopes with my longest lens as he moved around the ring celebrating his win over Steve Garcia. When I saw him start to climb onto the cage, I immediately realized there might be a possibility of a picture like this and zoomed out to capture more of the scene.
An octagon on the White House lawn for Trump’s 80th birthday and the nation’s 250th, in photos
Why this photo works
The White House is surely one of the most recognizable buildings in the world. The columns of the South Portico, the fighter standing with arms and legs spread wide in celebration, and the octagon padding of the UFC ring tell an entire story as your eyes move from top to bottom of the frame. With Lopes standing with his back to the camera, facing the White House, it becomes less a photo of him and more about the evening, the event, and the spectacle. It was fortunate that it was after nightfall, so things that might have been distracting, like the Marine Band and spectators seated behind the ring, are mostly in the dark. Only the key elements – the White House, Lopes, and the ring are lit up.
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For more extraordinary AP photography, click here.
World
British Prime Minister Keir Starmer faces potential leadership challenge from newly-elected Andy Burnham
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Andy Burnham has officially won his special election and regained a seat in Parliament, setting him up to challenge the deeply unpopular Keir Starmer as the leader of the Labour party and as prime minister.
Burnham, currently the mayor of Greater Manchester in northwest England, won a seat in Makerfield and came away with 55% of the vote in a field of more than a dozen candidates, according to The Associated Press. The runner-up was Rob Kenyon of Reform UK, a right-wing populist party, who received more than 9,000 fewer votes than Burnham.
Burnham last served as a member of Parliament in 2017 but strongly implied in his victory speech that he is returning with the intention to lead the United Kingdom.
“Everyone knows that politics isn’t working. Everyone can feel that the country isn’t where it should be. Tonight could, just could, be the turning point,” he said, according to the AP. “This result will bring about a country that works fairly for everywhere and for everybody.”
TRUMP ALLY NIGEL FARAGE DEALS MAJOR BLOW TO STARMER IN LOCAL UK ELECTIONS AS RESIGNATION CALLS MOUNT
Britain’s Labour party candidate Andy Burnham speaks to supporters after the Makerfield by-election in Ashton in Makerfield, England, on Friday, June 19, 2026. (Jon Super/AP)
This special election, called by-elections in Britain, was unusually significant because the area’s Labour MP, Josh Simons, intentionally resigned to allow Burnham to win the seat and pursue leadership.
The potentially outsized impact of this election was juxtaposed with the strange scene that unfolded when all the candidates gathered on Friday morning to hear the results. Burnham stood in between an independent candidate dressed in a fox costume and another candidate known as “Count Binface”.
As his name suggests, “Count Binface,” whose real name is Jonathan David Harvey, was wearing a trash can on his head and regularly runs in U.K. elections to advocate for increased voter turnout.
Starmer congratulated Burnham in a social media post on X, saying voters “chose Labour’s campaign of hope and optimism over division and hate.”
When asked about Burnham’s intentions to oust him as leader, Starmer said he will fight to remain prime minister, a position he has held for nearly two years.
“I’ve said repeatedly I’m not going to walk away from that,” Starmer told reporters.
Labour party candidate Andy Burnham, center, stands with other candidates on the podium at the Edge Wigan, awaiting the Makerfield by-election result announcement in Wigan, England, on Friday, June 19, 2026. (Jon Super/AP)
AS EPSTEIN-LINKED APPOINTMENT SPARKS BACKLASH, UK PM STARMER FACES PARTY REVOLT AMID RESIGNATION CALLS
Starmer led the Labour party to a landslide victory in July 2024 and ever since, his popularity has been eroding thanks to a persistently high cost of living, an anemic economy and a scandal over his willingness to accept gifts from wealthy donors.
Last September, Starmer was slammed for appointing Peter Mandelson as the British ambassador to the United States, when it was known as early as 2019 that Mandelson had a friendship with convicted child sex offender Jeffrey Epstein. Following an enormous public backlash, Mandelson was quickly dismissed from his post.
With Starmer as leader, Labour is increasingly losing liberal-minded voters to the Green Party, while also facing stronger challenges by Reform UK, a Nigel Farage-led party that advocates against mass migration and in favor of tighter border controls. Farage, an ally of U.S. President Donald Trump, said he was disappointed by Burnham’s victory.
Burnham is expected to head to London to be sworn in as soon as Monday. Under the British parliamentary system, the governing party can hold leadership elections in the middle of the term. The winner of such a contest can become prime minister without there having to be a national election.
British Prime Minister Keir Starmer awaits Switzerland’s Federal President Guy Parmelin on the sidelines of the G7 summit, in Evian-les-Bains, France, on Tuesday, June 16, 2026 (Isabel Infantes/Pool Reuters via AP)
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Under Labour rules, a lawmaker can challenge the leader if they win the backing of a fifth of their party’s members in the House of Commons. Burnham has enough lawmakers on board to trigger a leadership contest, according to a report from The New Statesman.
According to the AP, Culture Secretary Lisa Nandy said Burnham and Starmer will “have a conversation about what comes next” in the next few days.
The Associated Press contributed to this report.
French President Emmanuel Macron and Spanish Prime Minister Pedro Sánchez have issued a blistering rebuke against deportation camps outside the European Union, setting their countries on a collision course with a growing political majority.
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During a summit on Friday, 19 leaders across the bloc signed a joint declaration calling to make “full use” of a new European law that enables the construction of so-called return hubs to host migrants whose asylum applications have been denied.
The coalition, led by Denmark and Italy, two fierce advocates of outsourcing, wants to “move forward with solutions based in third countries as soon as possible”.
But for Macron and Sánchez, this path runs counter to European values and risks squandering financial resources and undercutting relations with neighbouring Africa.
“I am not sure that this is our Europe. I don’t know if these are the fundamental principles on which our Europe was built,” Macron said at the end of the summit on Friday.
“And I don’t think it’s effective, either. The proof is that I have not seen anyone make it work so far,” he went on, underscoring his strong dissatisfaction. (Italy has set up migration centres on Albanian soil but has fallen short of expected targets.)
“I have a lot of respect for anyone who wants to do it. I disagree, both pragmatically and in principle. I think it has nothing to do with European politics.”
Macron said his country was in favour of tougher laws to curb irregular arrivals but drew a red line on the physical transfer of migrants to faraway countries where they have never set foot. That possibility, long considered taboo, is allowed under a revamped Return Regulation described as the “strictest-ever” migration law.
“There is a question, in fact, around these famous return hubs in third countries. France does not support this policy. We are in favour of a more effective return policy. But first of all, I have never seen a return hub in a third country operate,” Macron went on.
“I invite you to consider what it is (in practice): this means that people who do not want to return to their country of origin or who cannot get back to their country of origin will be pushed into a third country, which will accept them in return for money.”
Macron mocked the jargonistic term “innovative solutions” that proponents of migration offshoring often use in their public communication and challenged the notion that host countries would respect human rights in exchange for financial incentives.
“I am a big supporter of innovation in my country,” he said, saying he would later attend the Vivatech festival in Paris. “But I am always very careful when talking about innovation in values and human rights. Allow me to have that reservation.”
Meanwhile, Sánchez, a vocal critic of the measures, said the deportation camps would be an “absolutely inefficient” and “worthless” response to irregular migration.
“It’s a mirage, if you will, that it will simply waste economic resources, and Europe doesn’t have many,” the Spaniard said after the summit in Brussels.
“Secondly, it sends a wrong message to those countries of origin and transit with which we should be collaborating, cooperating and showing empathy towards.”
Macron echoed Sánchez’s reputational concerns and insisted he would not allow EU funds to be used in any capacity to build the deportation camps, which are “neither effective nor do they correspond with our principles”.
“Sometimes, we hear one or the other (country) advocate policies with the African continent, so good luck defending our credibility on these continents by explaining that we will use the money for investments to build return hubs on their continents,” he said.
“What world do we live in?”
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