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MainStreet Macro: Curious about the economy? So are these kids

April 29, 2024 | read time icon 5 min

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In my experience, kids ask the best questions. So for this, the 150th issue of MainStreet Macro, I took advantage of ADP’s Take Your Kids to Work Day to invite three young friends to talk about the economy. Here’s what was on their minds.

Elijah, age 9: Why should kids care about the economy?

Whether you’re 9 or 90, everyone should care about the economy because they are part of it. Whether people are buying things, such as houses or Nintendo Switch consoles (Elijah’s favorite), or selling services such as banking or plumbing, these transactions make up the economy.

By and large, all of us are better off when the economy is strong and growing than we are when the economy is weak and declining. For Elijah, an expanding economy might mean more toys. For adults, it means higher wages and better living standards.

Joey, age 12: Will the economy go to shambles this year?

Don’t worry, Joey. The economy isn’t likely to go to shambles this year.

On balance, the economy has racked up more plusses than minuses so far this year.

The labor market is solid, and employers continue to hire aggressively. Layoffs are quite low compared to historical averages. The unemployment rate has been below 4 percent for the longest time in modern economic history.

Most important, consumers, who make up 70 percent of the economy, are still spending. In February and March, consumer spending was the strongest it had been in more than a year.

There are some minuses, though, too. The cost of things we like to buy is rising faster than we would like. And with interest rates at a two-decade high, it costs companies and people a lot to borrow money from banks. That high cost could lead adults to put off buying expensive things. Companies might be less willing to expand or invest. That hurts the economy.

Last week, government data showed that the U.S. economy grew more slowly than expected in the first three months of this year, prompting people to question whether it is still healthy. We also learned that inflation was higher than we thought, which could pose new challenges for the economy. The Federal Reserve committee that sets interest rates are likely to address these challenges when they meet later this week.

So, while the economy isn’t likely to go to shambles, it might not grow as fast as it could if inflation were lower.

Navami, age 11: What will be the impact of AI on jobs when it’s time for me to look for work?

Advancements in artificial intelligence have been bigger and faster than most people could have imagined couple years ago.

Like humans, AI now can write poetry and songs and produce images. And it can do some things better than humans, such as the complex math needed in advanced medicine and engineering.

These new AI superpowers are exciting, but we still have a lot to learn before we know how they will affect the job market in the future.

For example, do we want humans to work with AI, or do we want AI to function without human intervention? Will we use AI to replace things we already have, or use it to create new things? Will AI replicate human intelligence or expand it by doing things humans can’t?

How adults in technology and business answer these questions today will determine whether jobs are created or replaced by AI and whether wages will grow or shrink.

But we already know the skills that you kids, the future workforce, will need 10 years from now to make sure AI has a positive impact. (I can tell that Navami is a good student.) I’ll call them the three Cs.

First, kids must develop critical thinking skills to determine technology’s place in the economy. Second, they must be creative, so we can use AI in a way that will lead to innovation and new opportunities for wealth and prosperity. Third, the ability to collaborate with different types of people—and eventually machines—will lead to new ideas, which will help businesses grow and people thrive.

My take

When it comes to the economy, adults often think short-term. We look at the most recent data and try to assess how our businesses, household finances, or government budgets will do over the next month, quarter, or year.

This week, adults will have even more data to contemplate. ADP and the Bureau of Labor Statistics will release new information on job creation, and the Federal Reserve will consider what to do about interest rates.

Fed policymakers already have signaled that they’re unlikely to raise or lower rates this week, but how they communicate the complexities of the current economy to the world’s adult decision-makers will be as important as what they plan to do.

But for the future workforce—you kids—the important thing is not what the economy looks like three months from now. It’s the decisions we adults are making today to ensure the economy is still healthy 10 years from now.