Goldman Sachs believes that the U.S. economy is broadly balanced and that the AI boom has not yet resulted in widespread inflationary pressures. This assessment comes as Federal Reserve officials have frequently cited resource constraints from the AI boom as a source of inflation. Goldman Sachs' analysis, based on industry-level data, Beige Book text analysis, and alternative service sector data, indicates no obvious signs of overheating at the macro level.
While the economy is generally balanced, Goldman Sachs identified localized tensions in three sectors due to AI-related demand: electrical equipment, machinery manufacturing, and professional services. Despite these specific areas, the labor market remains balanced overall, with the job-worker gap for most industries dropping below pre-pandemic levels. Wage growth is also moderate, with about 35% of sub-sectors experiencing nominal wage growth exceeding 4%, a pace consistent with the 2% inflation target, far below the peak of approximately 90% in 2022.
Manufacturing capacity constraints are concentrated in AI-related equipment sectors, such as electrical equipment and machinery manufacturing, which are approaching their capacity utilization peaks. However, most manufacturing industries still have ample room to expand. Similarly, service sector capacity utilization is low overall, with professional and commercial services being the main exception as they assist with AI transformations. Goldman Sachs' composite bottleneck indicator, which integrates labor, manufacturing, and services data, remains at pre-pandemic levels, suggesting capacity pressures have not spread widely.
