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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.
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Iran’s hardline parliament speaker and key negotiator Mohammad Bagher Ghalibaf warned that Tehran would not honor its commitments under a newly signed memorandum with the U.S. if Washington fails to uphold its side of the deal, according to the media arm of Iran’s Islamic Revolutionary Guard Corps.
“If the United States does not honor its commitments, there is no way Iran will honor its own commitments,” Ghalibaf said.
Ghalibaf’s warning was echoed Thursday by Islamic Revolutionary Guard Corps Quds Force commander Esmail Qaani, who threatened the U.S. in remarks translated by MEMRI TV, saying, “Americans should know their place and avoid confronting the Muslims.”
Qaani added that “Trump is trembling” and warned that the U.S. “should fear not only Hormuz and Bab al-Mandeb, but many other locations as well.”
MEET IRAN’S HARDLINE SPEAKER WHO THREATENED TO BURN US FORCES — REPORTEDLY TEHRAN’S POINT MAN FOR TALKS
The warnings came after President Donald Trump and Iranian President Masoud Pezeshkian Wednesday digitally signed a copy of the memorandum aimed at ending the war and resuming the flow of traffic through the Strait of Hormuz.
Iran’s hardline parliament speaker and key negotiator Mohammad Bagher Ghalibaf warned that Tehran would not honor its commitments under a newly signed memorandum with the U.S. if Washington fails to uphold its side of the deal. (Majid Asgaripour/WANA)
The memorandum gives Iran major economic relief while leaving some of the most difficult nuclear questions for a final agreement to be negotiated throughout the next 60 days. Under the 14-point plan read by a senior U.S. official, Washington agreed to begin lifting its naval blockade, work with regional partners on a $300 billion reconstruction and development plan for Iran and terminate U.S., U.N. and other sanctions on an agreed schedule as part of a final deal.
The memorandum also says all licenses, waivers and permissions needed for related financial transactions would be granted by the United States.
In return, Iran reaffirmed that it “shall not procure or develop nuclear weapons,” and the sides agreed to resolve the fate of Iran’s stockpiled enriched material under a future mechanism, with the minimum method being on-site down-blending under International Atomic Energy Agency supervision.
The agreement defers many of the hardest questions — including how to wind down Iran’s nuclear program — until the 60-day negotiation period for a final deal.
But the Iranian figure at the center of the deal is not a diplomat known for moderation.
Ghalibaf, a former Islamic Revolutionary Guard Corps commander and longtime regime insider, has threatened American forces, vowed Trump would “pay the price” and built his career through loyalty to Iran’s security establishment.
The new warning underscored what experts say is the central risk of the agreement. Washington may be entering a deal with officials who can enforce Iran’s commitments but who have shown little sign of changing the regime’s long-term posture toward the U.S., Israel or the region.
Ghalibaf, 64, is a product of Iran’s security establishment. He rose through the ranks of the Islamic Revolutionary Guard Corps during the Iran-Iraq War, eventually becoming commander of the Islamic Revolutionary Guard Corps air force.
He later served as Iran’s national police chief, overseeing internal security forces responsible for suppressing protests, including the 1999 student uprising, alongside Qassem Soleimani.
After transitioning into politics, Ghalibaf attempted to run for president multiple times but failed. He instead built his career through loyalty to the system, serving as Tehran’s mayor for more than a decade before becoming speaker of parliament in 2020.
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Iranian Parliament Speaker Mohammad Bagher Ghalibaf looks on as parliament members wearing military uniforms chant in support of the IRGC in Tehran, Iran, on Feb. 1, 2026. (Hamed Malekpour/Islamic consultative assembly news agency/WANA/Handout via Reuters)
“Ghalibaf doesn’t have an independent line. His strength is that he is a ‘yes man,’” Beni Sabti, an Iran expert at the Institute for National Security Studies, previously told Fox News Digital. “If he is told to shake hands with special envoy Steve Witkoff, he will do it. If he is told to escalate, he will. It is not about moderation, it is about who gives the orders.”
“His name has also been linked to multiple corruption allegations, including misuse of oil revenues and sanctions evasion networks involving his family. His sons have reportedly been involved and are under sanctions,” Sabti said.
“There have also been public scandals involving family members traveling abroad and making luxury purchases, including widely circulated images of them arriving with numerous high-end Gucci suitcases.”
Behnam Ben Taleblu, a senior fellow at the Foundation for Defense of Democracies, said the image of Ghalibaf at a signing ceremony with a senior U.S. official would be a propaganda victory for the regime.
“There was a time when the Islamic Republic would have been terrified to be seen signing such a thing,” Ben Taleblu told Fox News Digital. “Postwar, this is a sign of the regime’s opportunism, and no one identifies that opportunism better than someone like Ghalibaf, who comes from the IRGC, who is a corrupt politician and is a wheeler and dealer.”
But Taleblu warned that Washington should not confuse Ghalibaf’s opportunism with moderation.
“The mirage is the myth of Iranian military moderation and the myth that, with time, this regime will integrate and put aside all the things that have kept it on the sidelines for so long,” he said. “Transforming Iran via a deal — that is a huge lift.”
Ghalibaf’s wartime statements reflect the hardline posture inside Iran’s leadership. In remarks aired on Iranian television Jan. 12 and translated by MEMRI, he warned that U.S. forces would face catastrophic consequences if they confronted Iran.
“Come, so you can see what catastrophe befalls American bases, ships and forces,” he said, adding that American troops would be “burned by the fire of Iran’s defenders.”
TRUMP ADMINISTRATION UNVEILS SWEEPING TERMS OF PROPOSED IRAN AGREEMENT
A man lights a cigarette with fire from a burning picture of Iranian Parliament Speaker Mohammad Bagher Ghalibaf as Israelis rally in support of nationwide protests in Iran in Holon, Israel, on Jan. 14, 2026. (Ammar Awad/Reuters)
More recently, he warned that “the blood of American soldiers is the personal responsibility of Trump” and vowed Iran would “settle accounts with the Americans and Israelis,” adding that “Trump and Netanyahu crossed our red lines and will pay the price.”
John Hannah, a senior fellow at the Jewish Institute for National Security of America and a former national security advisor to Vice President Dick Cheney, said Ghalibaf’s expected role reflects the reality of who holds power inside Iran.
“If you’re going to sign an agreement with Iran, those are the forces in charge and calling the shots, presumably with the approval of the new supreme leader,” Hannah told Fox News Digital. “If the U.S. harbors hope that Iran will ever implement any of their obligations under the MOU, these are the people — odious as they are — capable of making it happen.”
But Hannah said the central question is whether Iran’s leadership sees compliance as useful or whether the agreement is simply a tactical pause.
“The big question is whether they see it in their interest to do so, or are they only buying time, rebuilding their power and preparing for the next round of conflict,” he said.
Ben Taleblu was even more blunt, warning that even a seemingly favorable agreement would not change the nature of the regime.
“Even if you’ve got the perfect deal, with this kind of regime, with this kind of mentality, they will escalate,” he said. “I thought we would have learned by now what the regime did after the JCPOA. It built a vast missile arsenal. It literally built an empire of terror proxies that took Israel years of blood, effort and money to dismantle, backed by American support.
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Iranian Parliament Speaker Mohammad Bagher Ghalibaf speaks during a press conference in Tehran, Iran, Nov. 27, 2024. (Majid Asgaripour/WANA via Reuters)
“If we engage in pay-to-play with these guys,” he added, “I’m sorry to sound the alarm bell like this — but something tells me this is bad either way.”
Responding to questions about the threats from Ghalibaf and IRGC Quds Force commander Esmail Qaani, the White House defended Trump’s approach and warned Iran would face consequences if it failed to reach a final deal.
“President Trump has a great track record of good deals for the American people, and the President has been clear about the consequences if Iran fails to make a good, final deal,” White House spokeswoman Olivia Wales told Fox News Digital.
“What the president has achieved on the battlefield and at the negotiating table is nothing short of remarkable and will strengthen American security for many years to come.”
Tehran holds back from talks to cement ceasefire due to ongoing Israeli attacks on southern Lebanon.
Published On 19 Jun 2026
Planned talks in Switzerland between the United States and Iran to discuss the technical terms of their ceasefire deal have been postponed.
The Swiss Foreign Ministry confirmed early on Friday that the talks, which were scheduled to take place in Burgenstock, would now not go ahead.
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Reports suggest that Iran has delayed sending its delegation to discuss the technical issues linked to the ceasefire deal – digitally signed by the two countries on Wednesday – due to Israel’s ongoing military campaign in Lebanon.
Israeli strikes overnight and into Friday have reportedly killed at least 16 people in southern Lebanon, with Iran-linked Hezbollah reporting intense fighting.
Talks postponed
A ceremony followed by talks was expected to be held at the Burgenstock Resort in Stansstad, near Lucerne in central Switzerland.
It is owned by Katara Hospitality, part of Qatar’s sovereign wealth fund, which helped mediate peace in the conflict.
On Friday, in a message to media outlet AFP, the Swiss foreign ministry said: “The planned talks between the US, Iran, Qatar and Pakistan have been postponed”.
“Switzerland remains ready to facilitate these talks. The relevant preparatory work at Burgenstock is continuing,” it added, without providing a new date for the talks.
The announcement followed a report from media outlet Al-Mayadeen that Iran was delaying sending its delegation to Switzerland over Israel’s ongoing military campaign in Lebanon.
Israeli Prime Minister Benjamin Netanyahu said Thursday that Israel’s military will stay in a “security zone” of southern Lebanon as long as “Israel’s security needs require it.”
Israel and Hezbollah are not parties to the agreement, but Iran has insisted Israel must withdraw from the large swath of southern Lebanon it is occupying.
Logistics have never been ‘simple or predictable’
The US push to quickly begin high-stakes talks with Iran hit a snag just two days after the signing of a 14-point memorandum of understanding with the US that sets out a framework for talks during a 60-day negotiation period.
Vice President JD Vance had been prepared to make an overnight flight to meet with his Iranian counterparts at the mountainside resort in the tiny Swiss village of Obburgen.
His staff and a small pack of journalists had even gathered at Joint Base Andrews outside Washington in anticipation of the trip.
Meanwhile, dozens of White House officials, advance staffers and more media gathered in Switzerland to prepare for Vance’s anticipated arrival.
But then, abruptly on Thursday evening, the trip was called off.
The White House issued a statement explaining Vance – who has been tapped by President Donald Trump to lead the negotiations – and his delegation were prepared for talks, but they were unable to finalise plans and the vice president would remain in Washington.
“The logistics of these negotiations have never been simple or predictable,” the statement noted.
Also on Thursday, Pakistan’s Prime Minister Shehbaz Sharif cancelled his trip to Switzerland, his spokesperson told AFP.
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