We study the importance of aggregate shocks, such as demand and technology shocks, for firms’ automation decisions. By directly affecting the relative factor prices, such shocks pin down how intensively capital and labor are used in production. We show that permanent demand shocks can change the steady state of the economy, whereas the impact of temporary shocks depends crucially on their magnitude and length. Positive technology shocks can also shift the automation level of the economy, where the speed of adjustment is inversely proportional to the magnitude of the shock. We also compare the impact of these shocks with inelastic and elastic labor supply, and conclude that the impact of these shocks is stronger in the latter case.