• White House economic adviser Kevin Hassett predicts an AI-led productivity surge could push GDP above 4% in early 2026, echoing the 1990s internet boom.
  • The January 2026 jobs report showed 130,000 jobs added, exceeding expectations but below prior-year levels, as AI investments boost output while potentially reducing labor demand.
  • Amid soaring corporate profits and a shifting labor market, economists debate whether AI will temporarily enhance or fundamentally decelerate job growth, with political and regulatory factors adding complexity.

Kevin Hassett, director of the White House National Economic Council, has framed the burgeoning artificial intelligence revolution as a potential catalyst for significant economic expansion, drawing parallels to the transformative impact of the internet in the 1990s. In remarks on CNBC ahead of the January 2026 employment data release, Hassett suggested that an AI-driven productivity boom could propel GDP growth beyond 4% in the first quarter of 2026, while leading to smaller monthly job numbers due to higher efficiency and slowing population growth.

The latest jobs report, which showed 130,000 positions added against expectations of 69,000, underscores this nuanced landscape. Unemployment held at 4.3%, but January layoffs hit 108,435 cuts—the highest since 2009—even as hiring plans reached a post-2009 low. According to people familiar with the matter, this divergence reflects how AI investments are already paying off: productivity and profitability soared in 2025, per St. Louis Fed data, with AI spending boosting GDP in the year's first nine months. For instance, companies like Caterpillar (CAT) have reported efficiency gains, such as producing 20 widgets with one fewer worker, though this displaces jobs and lowers labor demand.

Efforts to contextualize these shifts have hit a snag in some quarters. Trump advisers, including Peter Navarro, have tied lower job expectations to deportations and urged Wall Street to recalibrate its forecasts. Meanwhile, the administration's disbanding of BLS advisory groups and proposed budget cuts have sparked concerns among economists about data integrity, especially after Trump alleged prior figures were "rigged." Hassett, however, downplayed government shutdown risks, noting bipartisan disinterest, and emphasized that no panic is advised amid the AI boom.

Without sustained productivity gains economy-wide, the long-term outlook remains uncertain. Inflation held at 2.7% in late 2025, and tax cuts from the One Big, Beautiful Bill Act enacted in July 2025 are projected to add 2.3 GDP points in Q1 2026. Yet, as AI spending lifted stocks and affluent consumer spending in 2025, equity indices dipped slightly post-Hassett's comments, hinting at risks of an investment bubble as the Fed eases regulations. Federal Reserve Chair Jerome Powell's term ends in May 2026, positioning Hassett as a top successor contender, according to sources close to the discussions.

In the short term, expect "slightly smaller" job numbers consistent with high GDP, Hassett said, with Q1 2026 growth potentially exceeding 4% via an $18 trillion capital spend and tax changes. Stakeholders are divided: while corporate profits and GDP get a boost, workers in sectors like federal government and finance—net job losers in January—face relocation needs amid layoffs, even as healthcare, social assistance, and construction gained. Public reactions vary, with some economists seeing temporary enhancement and others flagging deceleration evidence, making the economic narrative a key hinge in upcoming midterms.

This builds on a 2025 trend of decelerating jobs, such as December's 50,000 added versus 323,000 the prior year, and follows Biden-era higher breakeven rates. As AI continues to transform operations across firms, monitoring job market evolution and potential bubble bursts will be critical. Attempts to reach Hassett for further comment were unsuccessful, but his vision suggests a future where AI could redefine economic growth, if productivity gains materialize broadly.