[Inside Chodong] AI's Innovation Paradox... Look Beyond the Misleading Indicators

The massive boom in artificial intelligence (AI) development is showing up as economic growth. Capital expenditures (CapEx) of hundreds of billions of dollars by U.S. big tech companies on data center construction, securing power grids, and purchasing AI servers and cutting-edge semiconductors are counted under “private fixed investment” in gross domestic product (GDP). The figures are being dramatically inflated, even though this spending has not actually produced physical goods or created jobs.

The same illusion is appearing in South Korea. Exploding demand for high-bandwidth memory (HBM), a key component in AI servers, and cutting-edge semiconductors has boosted the country’s overall exports and significantly improved its trade balance and economic growth figures. Looking only at macroeconomic statistics, South Korea’s economy appears to be growing steadily despite high interest rates worldwide and geopolitical risks.

But once the froth is stripped away from the figures, the crisis in the real economy becomes clear. The labor market is one of the starkest examples. The U.S. Department of Labor reported that nonfarm payrolls increased by just 29,000 in September 2026. That was a shockingly low figure compared with the market forecast of 84,000. More concerning is that the slowdown in job growth is becoming a trend. In its September report, the department revised employment figures for July and August, revealing that the combined job gains for the two months had been overstated by 60,000.

South Korea, too, is floundering in a mire of misleading statistics. The government touts a record-high employment rate of 63.3% in August as an achievement, but this is merely an illusion created by short-term jobs for older people. Moreover, the booming semiconductor industry has a low employment inducement coefficient of 1.86. This is an absurdly low level compared with the manufacturing average of 4.85, the automotive industry’s 5.41, and the service sector’s 10 or more. Meanwhile, the number of people aged 15 to 29 who have given up looking for work and are classified as “taking a break” has reached 469,000, already exceeding the previous record set during the COVID-19 pandemic.

The reasons for the collapse of the labor markets in the two countries differ. But in both, the severity of the problem is being overlooked because it is obscured by AI as a new engine of growth. The AI-driven, capital-intensive technological revolution, which is distorting macroeconomic indicators in this way, is likely to make labor markets even more difficult in the years ahead. U.S. outplacement firm Challenger, Gray & Christmas reported that U.S. companies announced 55,000 job cuts last year, citing the use of AI. That was more than 12 times the number of AI-related job cuts announced just two years earlier. This year, the firm expects AI-related job cuts to reach 88,000. If this continues, the “innovation paradox”—in which the more AI boosts productivity, the less room there is for young people in the workforce—is bound to arrive sooner than expected.

History teaches us that when the frustrations of young people who have lost their jobs and been marginalized build up, they can erupt into anger. The Arab Spring, which shook the Middle East, and France’s Yellow Vest protests are prominent examples. This is no time to take comfort in dazzling macroeconomic indicators. It is time to embark on structural reforms to transform the fundamentals of the real economy, including creating more jobs people want to do.

This content was produced with the assistance of AI translation services.