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.
The United Nations has confirmed it placed Israel on a blacklist of countries suspected of committing sexual violence against civilians, and pushed back on accusations made by Israel regarding its inclusion.
The list, part of a “conflict-related sexual violence” report released on Friday, prompted Israel’s foreign ministry to say it would sever all ties with UN Secretary-General Antonio Guterres.
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Last August, the UN cited “credible information” regarding sexual violence committed by Israeli security forces against Palestinian detainees in prisons and other detention centres, and said UN inspectors had been denied access to the facilities.
“We invited the representative of the UN to come to Israel to check those ridiculous allegations. They chose not to come,” Israel’s UN Ambassador Danny Danon posted on X on Thursday.
“I never received an iota of information on measures taken by the government of Israel on implementation of the preventive measures,” Pramila Patten, the UN official who authored the report, told reporters on Friday at a briefing at the UN’s New York headquarters.
“I have made several requests in writing, and sometimes during meetings, for details about initial steps, including the issuance of orders of command information on access and information on accountability measures, but I did not get any response on the substantive aspect of the preventive measures,” she added.
Patten did confirm that there had been an invitation from Israel, but referred also to disagreements about the scope of the visit and related issues of access and cooperation, and said it ultimately had to be suspended due to Israel’s war on Gaza.
‘Multiple incidents’ in Gaza and occupied West Bank
This year’s report said that in 2025 “the United Nations verified multiple incidents of conflict-related sexual violence, including as a form of torture, inflicted against 14 men, seven women, nine boys and one girl from the Gaza Strip and the [occupied] West Bank.”
It said 13 of the attacks happened last year, and 18 in 2023 and 2024.
“Violations consisted of rape, including with objects, gang rape, attempted rape, physical violence to the genitals, instances of targeted shooting of the genitals, touching of breasts and genitals, strip and cavity searches conducted without apparent security justification, forced nudity and threats of rape,” it said.
“Rape and gang rape, in some cases repeated, were perpetrated against nine victims, the majority Palestinians from Gaza,” it said, adding that perpetrators included Israeli armed and security forces. The assaults occurred primarily during detention and interrogation in several sites, including military camps, at checkpoints and during Israeli military operations in the Occupied Palestinian Territory.
It said survivors included journalists and human rights defenders and in some cases, the violations were filmed or photographed, including one case of rape.
The report added that sexual violence against female detainees included mostly threats of rape, forced nudity, unwanted touching, and humiliating or degrading strip searches without justification, while men and boys were targeted with rape, attempted rape and violence to the genitals.
This resulted in five male victims suffering severe rectal bleeding or swelling for multiple days or weeks, it added.
Russia added to list alongside Israel
The latest UN report also contains harrowing descriptions of abuses at the hands of Russia’s military after “findings of continued patterns of sexual violence documented”.
The UN human rights monitoring mission in Ukraine had verified 310 cases of conflict-related sexual violence perpetrated by Russian armed and security forces.
It said the cases, including rape, gang rape, genital mutilation, electric shocks and beatings to the genitals, injured 280 men, 26 women and four girls.
The report’s annex lists 77 parties deemed responsible for patterns of conflict-related sexual violence, including 62 non-state actors.
New additions include three non-state armed groups operating in the Democratic Republic of the Congo.
Nearly 10,000 cases of conflict-related sexual violence were recorded worldwide last year – more than double the previous year’s figure, the report said.
Being added to the list does not automatically carry specific punitive measures such as sanctions, although public naming and shaming can cause significant reputational damage for the states involved, and those repeatedly listed are barred from UN peacekeeping operations.
Patten said the increase in cases of conflict-related sexual violence verified by the United Nations marks a very disturbing trend that was still only the “very tip of the iceberg”.
“This number can be attributed to the fact that we are going through a time when we have a record number of extremely violent conflicts, and the fact that perpetrators are feeling emboldened by a context of impunity, where this crime is almost cost-free,” she said.
Japan’s population fell by more than 3 million over the past five years, according to official statistics released on Friday, a drop that underscores the depths of the country’s accelerating demographic crisis.
The population stood at 123 million in 2025, according to preliminary census results, down from 126.1 million in 2020. It is the biggest decrease since the government began collecting census data in 1920.
Change in population every five years
Japan’s population loss is accelerating
Japan’s population peaked in 2008 at 128 million, and it is projected to fall to 87 million by 2070. The country is now roughly the same size it was in 1989.
For decades, the Japanese authorities have tried to make up for the rapidly aging population by encouraging young people to have more children. But the effort has fallen short, leaving the country with one of the world’s lowest birth rates. For each new birth, there are two deaths.
Japan is a harbinger of the demographic headwinds that will soon buffet other developed countries. The shrinking population is already constraining Japan’s economic growth, putting pressures on its health care system and causing labor shortages.
The census data shows that the demographic crisis has now reached almost every part of Japan. All but two of the country’s 47 prefectures reported population decreases in 2025, and the rate of decline is accelerating.
Among the hardest hit areas were the northern prefectures of Akita and Aomori, where the population shrank by about 8 percent from 2020 to 2025. Those areas are home to some of Japan’s oldest residents, and young people have left at a rapid rate because of stagnant wages and harsh winters.
Most of Japan is losing population
The Japanese countryside is hollowing out as the population ages and young people leave to seek jobs in Tokyo, Osaka, Nagoya and other cities. In some rural areas, schools are being converted into nursing homes and community centers. Millions of homes are vacant; government offices and hospitals are downsizing; and train lines are shutting down.
Opening Japan’s doors more widely to foreigners could help offset the declines. But the government has long taken a cautious approach to immigration, and nationalist politicians and commentators have gained influence recently with a “Japan First” agenda.
“Japan has now reached a level where this kind of decline is not reversible in the short- or medium-run,” said James Raymo, a professor of sociology at Princeton University who studies Japan. “It simply will not happen in the absence of mass immigration.”
There were a few bright spots in the census, including Okinawa, a subtropical chain of islands in the south, where the population grew slightly. Okinawa has Japan’s highest fertility rate, with women there giving birth to an average of 1.5 children in their lifetimes, compared with 1.1 nationally.
Japan’s biggest cities are managing to stave off demographic decline — for now. The population of the Tokyo metropolitan area, which includes Tokyo and the surrounding prefectures of Kanagawa, Saitama and Chiba, rose slightly to 37 million in 2025. The area now accounts for roughly 30 percent of Japan’s total population.
Tokyo, a vibrant hub of business, politics and culture, is now about 20 times denser than the rest of Japan — and one of the world’s densest cities. (Tokyo’s population rose more than 1 percent to 14.2 million in 2025.) The growth has been fueled in large part by an influx of students and young workers looking for jobs and educational opportunities.
Japan’s woes are likely to worsen in the coming decades. It will probably become increasingly difficult to find workers to staff schools, hospitals, police departments and train stations. And the country could lack enough young people to pay the taxes necessary to support retirees.
Professor Raymo said the Japanese government’s efforts to promote fertility had “not really moved the needle.” He said that ultimately Japan could provide lessons for other governments.
“More and more countries in Asia and elsewhere will experience similar levels of demographic decline,” he said. “Japan is just at the forefront and has been at it much longer.”
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A drone struck an apartment building Friday in Romania, a NATO member, causing an explosion and fire that injured multiple people, local authorities said.
According to Romania’s Ministry of Defense, the incident occurred as Russia carried out an overnight drone attack in neighboring Ukraine near the Romanian border.
“A drone entered Romanian airspace, was tracked by radar systems as far as the Southern area of Galați municipality, and crashed onto the roof of a residential apartment building,” the ministry said.
Romania — a member of both NATO and the European Union — has reported more than two dozen incidents involving Russian drones entering its airspace since Moscow launched its invasion of Ukraine.
NATO SCRAMBLES WARPLANES AS RUSSIA HITS NEAR ROMANIAN BORDER IN UKRAINE
A fire burns on the roof of a 10-story block of flats after a drone crashed into the building, causing an explosion and injuring two people, near the border with Ukraine, in Galati, Romania. (Romanian Department for Emergency Situations/Handout via REUTERS)
Friday’s incident marked the first time a drone struck a populated area in Romania, resulting in injuries.
Romania’s state news agency reported that a woman and her child were hospitalized with minor injuries, while two other people were treated at the scene for panic attacks.
Following the incident, Romania requested additional anti-drone capabilities from NATO and described the drone’s flight path as a serious violation of international law, according to The Associated Press.
RUSSIAN DRONES TEST NATO’S ARTICLE 5 DEFENSE GUARANTEE AHEAD OF FRIDAY SANCTIONS DEADLINE
Russian servicemen prepare to launch an interceptor drone for an action in an undisclosed location in Ukraine. (Russian Defense Ministry Press Service via AP)
Romania’s emergency response agency said the drone struck the apartment building and exploded, sparking a fire on the 10th floor.
The agency said the drone’s entire explosive payload detonated upon impact.
Seventy people were evacuated from the building, authorities said. The fire has since been brought under control.
NEW ROMANIAN LAW MAY HAVE AVERTED NATO CLASH WITH RUSSIA AFTER BORDER STRIKES
Ukrainian President Volodymyr Zelenskyy has urged the United States and its allies to provide additional air defense systems as Russia intensifies drone and missile attacks. (Javier SORIANO / AFP via Getty Images)
The defense ministry said two F-16 fighter jets and a military helicopter were deployed to monitor the Russian attack. The pilots were authorized to shoot down any drones that posed a threat.
The incident came after Ukrainian President Volodymyr Zelenskyy said earlier this week that he was pressing the United States to provide additional Patriot air defense missiles to help counter Russian attacks.
He warned that deliveries to Ukraine were falling dangerously short as the conflict with Iran strains U.S. military resources and stockpiles.
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“I believe [the U.S.] must act quicker. We are being very persistent,” Zelenskyy told reporters during a visit to Sweden.
Reuters and The Associated Press contributed to this report.
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