Goldman Sachs warns of 'jobless growth' in the US as AI fuels output but not jobs

In a recent report, Goldman Sachs has raised concerns about the potential emergence of 'jobless growth' in the United States, attributing this phenomenon to the increasing influence of artificial intelligence (AI) on the economy. Despite strong GDP growth, the bank's analysts suggest that job creation may not keep pace, indicating a shift that could persist in the future. The analysts noted that while job growth has been modest recently, most of the economic expansion seems to stem from productivity gains driven by AI. They highlighted that factors such as a declining population and limited immigration are unlikely to significantly enhance the labor supply. Evidence of a weakening job market is already visible, particularly outside the healthcare sector, where recent months have seen negative job growth. Corporations are increasingly turning to AI as a means to cut labor costs, which could have long-lasting implications for hiring practices. Goldman Sachs acknowledged that worries surrounding technology's impact on employment are not new. Over the last decade, there has been a growing fear that advancements in technology could outpace job creation. Until now, these concerns hadn't manifested strongly in employment data, but signs suggest that this may be changing. The report indicates that AI is beginning to adversely affect the job prospects of younger workers in the technology sector, with employment declines already occurring in industries most susceptible to AI disruption. While the analysts express skepticism about dire predictions of high unemployment due to technological advances, they do anticipate some transitional challenges as the economy adjusts to new innovations. They emphasize that, historically, technological advancements have led to temporary spikes in unemployment and a need for workers to adapt to new roles. However, the nature of the innovation plays a crucial role—some technologies create jobs while others, particularly certain AI applications, tend to replace them. The analysts warn that if AI primarily acts as a substitute for labor, it could pose significant challenges in maintaining full employment levels. The ultimate impact of AI on employment may become clearer during the next economic downturn, as historical trends show that routine job sectors often suffer during recessions following productivity surges. This concern is compounded by the risk of increasing inequality, with AI potentially benefiting workers who can effectively utilize new technologies while diminishing opportunities for mid-level positions. The report suggests that AI may even aid lower-skilled workers in some instances more than their higher-skilled counterparts. On a more positive note, Goldman Sachs points out that increased productivity can help keep inflation in check, potentially allowing the Federal Reserve to reduce interest rates even amid rising unemployment. This analysis arrives at a time when the U.S. faces various uncertainties, including a lack of official job data due to the government shutdown and the economic repercussions of recent trade policies. Recent statistics indicate a substantial job loss in the private sector, with 32,000 positions disappearing in September alone, while other metrics reveal a significant decrease in job openings compared to the previous year. The current hiring climate is reportedly the weakest it has been since the Great Recession, further highlighting the challenges ahead.