On Wednesday, the Federal Reserve cut interest rates by a quarter point. And the projections the central bank put out suggest policymakers expect decent economic growth ahead, but not necessarily more jobs.

Fed Chair Jerome Powell, asked about this at his post-FOMC press conference Wednesday, had this response: “The implication is obviously higher productivity, and some of that may be AI, it just also, I think productivity has just been almost structurally higher for several years now.”

Productivity is the name of the game, as in business output divided by total hours worked. 

The economic data right now is a bit of a conundrum said Josh Hirt, senior U.S. economist at Vanguard. 

“We're seeing very low job creation, but we're seeing reasonably strong GDP numbers,” he said.

This is what Chair Powell was alluding to as well: the economy growing without adding jobs. But how?

“There's one element that sort of squares some of that, and productivity could be the answer to that,” Hirt said.

Remember, it wasn’t that long ago that employers were having trouble finding enough workers. Many turned to automation and over the last couple of years, and the results have been adding up. 

“We are certainly seeing areas, like transportation and logistics, leveraging technologies to make [routes] more efficient,” Hirt said.

Productivity gains have been concentrated among retailers and the services sector. Amazon this year deployed its one-millionth warehouse robot. Fast food restaurants increased self-service kiosks. And yes, artificial intelligence is playing a role too.

“There's a whole wave of very powerful technologies that are just coming online and they're beginning to have an effect in specific areas like call centers, software, where there's measurable productivity gains,” said Erik Brynjolfsson of Stanford. 

The Bureau of Labor Statistics says productivity rose 3.3% in the second quarter of this year. But economist Gerald Cohen of the University of North Carolina said the big question is whether such robust gains can continue. He said they may have already slowed. 

“The data is saying, maybe, but it's not clear, because there's just been so much post-COVID challenges,” he said.

Cohen said there’s a lot of noise in the data, but it’s tempting to hang onto hopes that productivity growth will remain robust, because that would simplify the Fed’s work. 

“If we think we're in this higher era in productivity, that generally matches with an era of low inflation or lower inflation,” he said.

And if productivity does the job of cooling inflation, then the Fed can focus on supporting the labor market instead.