AI is creating labor market winners and losers

There have been recent signs that the labor market is holding up. But new data suggests that AI is quietly displacing workers. So, who’s right?

Morgan Stanley estimates that AI has added 15 basis points to the US unemployment rate. That’s a small contribution overall, but it’s up from 10 basis points in December—a 50% increase in AI-related job displacement in less than a year.

The impact isn’t evenly distributed. In industries where companies most frequently discuss AI adoption, unemployment is running roughly 50 basis points above normal, with workers aged 22 to 27 bearing the brunt.

The flip side

AI may be a headwind for some workers, but it’s becoming a major tailwind for the broader economy. Oxford Economics’ Michael Pearce estimates that roughly one-third of recent US GDP growth can be traced back to the AI boom. At its current pace, spending on software, datacenter construction, and computer and communications equipment is running at an annualized rate of roughly $1.5 trillion, up from about $1 trillion two years ago, the Wall Street Journal reported.

All that spending is creating a surge in hiring among blue-collar workers. As tech giants pour billions into datacenters, demand for electricians, carpenters, and maintenance workers has climbed. In fact, Meta, Google, and BlackRock have collectively committed more than $265 million to train workers, and Indeed estimates that datacenter installation and maintenance jobs pay 42% more than similar roles elsewhere.

“This is the largest infrastructure buildout in human history, and that’s going to create a lot of jobs. And it’s wonderful that the jobs are related to tradecraft,” Jensen Huang said at the World Economic Forum in Davos. “In the United States we’re seeing quite a significant boom in this area. We’re talking about six figure salaries for people who are building chip factories or computer factories or AI factories.”

What to watch

Despite AI’s push and pull, the broader labor market isn’t showing signs of cracking.

Today’s JOLTS report was largely a non-event: Job openings held steady at 7.4 million, while hires, quits, and layoffs were all essentially unchanged. It’s another sign that the labor market remains stuck in a “low-hire, low-fire” equilibrium.

Next up is ADP payrolls on Wednesday and the monthly employment report on Friday, both of which should offer a clearer picture of whether AI-driven displacement is beginning to show up in the broader labor market.

For now, one thing is clear: The economic effects of AI are already evident, but the effects on the labor market are just starting to surface.—SY