AI's impact on the job market is starting to show up in the data
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The impact of AI on the job market is starting to show up in the data analyzed by Wall Street firms — so far it's pretty modest, but certainly real.
Why it matters: New reports from Morgan Stanley and Goldman Sachs come in the wake of a deluge of doomsday predictions and tell a more nuanced story of how AI is changing the job market.
Zoom in: Goldman Sachs looked at occupation-level federal data and scored jobs by AI exposure: separating roles that can be completely substituted by AI (proofreader) and those that can be considered complementary (doctor).
What they found: AI has both created and destroyed jobs over the past year.
- It reduced employment in occupations that are easily substituted by AI, translating to a slight 0.16 percentage point increase in the unemployment rate.
- At the same time, AI decreased unemployment by 0.06 point in jobs that are "augmented" by AI — roles that rely on things that machines cannot replace, like human judgment, interpersonal interaction and accountability.
Zoom out: Overall, AI raised the unemployment rate by just 0.1 percentage point, they find.
State of play: Morgan Stanley did a similar analysis — separating jobs by AI exposure. They come to a similar conclusion: AI added 10 basis points to the overall unemployment rate at most. That's just 0.1 percentage point.
Between the lines: If you're focusing only on how AI displaces workers, you're missing the story, Joseph Briggs, an economist at Goldman Sachs, told my colleagues at Axios Macro in a recent interview.
- Morgan Stanley's analysis puts it this way: "Gen AI's impact on labor demand is double-edged: The same technology that can automate tasks can also augment labor, raising productivity."
Here's a great example of how experts can have a hard time seeing the difference between AI substitution and augmentation.
- Ten years ago, the godfather of AI, Geoffrey Hinton, famously said: "We should stop training radiologists now. It's just completely obvious that within five years, deep learning is going to do better than radiologists."
- Instead, what happened was that radiologists have broadly adopted AI and are using the tools to do their jobs better, as the New York Times reported last year.
- The number of radiologists has increased, and their pay has gone up since Hinton's comments, the Morgan Stanley paper points out.
Friction point: Companies this year are talking about AI displacing workers a lot more than they are talking about AI driving hiring, per an analysis the bank did of company earnings call transcripts.
- They suggest that this might just be executives telling a story that investors want to hear: "Markets are rewarding cost-cutting narratives, which creates a strong incentive for firms to frame efficiency programs as AI-driven," they write.
- "Transcript momentum should be read as directional, not definitive proof of incremental job losses."
The bottom line: AI's impact on the labor market is small so far, and it's more complicated than the doomers want you to think.
