AI is already impacting the labor market, starting with young tech workers, Goldman economist says

Goldman Sachs analysis indicates generative AI is already impacting the labor market, notably in the tech sector, despite limited full-scale deployment. Evidence includes a hiring pullback and a 3 percentage point increase in unemployment for tech workers aged 20-30, as companies increasingly leverage AI for tasks and scale back junior hires. Economist Joseph Briggs projects that 6-7% of all workers could eventually be displaced by AI automation in a baseline scenario, a process that could accelerate with faster adoption or economic downturns, though this forecast excludes the potential impact of Artificial General Intelligence.

Analysis

According to research from Goldman Sachs, the labor market is already exhibiting signs of disruption from generative AI, even before widespread enterprise deployment. The primary evidence is concentrated in the technology sector, where a two-decade trend of increasing employment share has reversed over the last three years. This pullback is disproportionately affecting younger workers, with the unemployment rate for tech professionals aged 20-30 having surged by 3 percentage points since the beginning of the year, a significantly larger increase than for other demographics. This trend aligns with commentary from executives at Microsoft, Alphabet, and Salesforce, who report that AI is already handling substantial workloads, such as 30% of coding on some projects. This indicates a strategic shift towards 'labor substitution,' where companies are curtailing junior hiring in favor of AI-driven productivity. Goldman's baseline forecast projects that 6-7% of all jobs could be displaced by AI automation over the next decade, with the potential for this transition to accelerate due to faster technological adoption or an economic downturn. Notably, this forecast explicitly excludes the more profound, systemic impact that the emergence of Artificial General Intelligence (AGI) would have on labor markets.

Key Decisions for Investors

• Investors should evaluate large-cap technology firms like Microsoft and Salesforce for potential margin expansion, as their reported use of AI to automate tasks and reduce junior hiring could drive significant long-term productivity gains.
• Monitor tech sector unemployment data, especially for workers under 30, as a leading indicator of broader AI-driven labor displacement and potential macroeconomic headwinds that could impact consumer spending and economic growth.
• Consider maintaining or increasing exposure to key AI enablers and infrastructure providers, such as Nvidia, which are positioned to benefit directly from the corporate spending cycle on generative AI, a trend that appears independent of the labor substitution effects.
• Assess portfolios for long-term risk by identifying companies heavily reliant on roles susceptible to automation, as Goldman's forecast of 6-7% job displacement represents a baseline structural shift that could negatively impact specific industries.