Is AI enabling the economy to grow without any need for new jobs? If that happens, what kind of world will we face? It’s a question that’s top of mind for leaders given recent events.
Recently, Goldman Sachs published an analysis titled “Jobless Growth,” noting the current odd pattern of the U.S. economy growing strongly while jobs increase only slowly. The Goldman analysts aren’t extremists like, say, legendary venture capitalist Vinod Khosla, who says AI will automate 80% of all jobs by 2030. Still, they see “concerning signs” in companies increasingly using AI.
A recession could clarify the big picture considerably, they say. That’s when workers in routine jobs tend to get laid off and not brought back when the recession ends. Consider for example the 2001 recession following the internet bust. CEOs had been working hard to use the internet in their businesses, reducing headcount in the process, but firing lots of employees is unpleasant, and bosses often put it off.
The recession forced them to see how many employees they didn’t need anymore, and it was a lot. Economists call the aftermath “the jobless recovery.”
The day after the Goldman analysis appeared, Goldman itself sent a memo warning employees of potential job cuts and slower hiring through the rest of the year, noting that “the rapidly accelerating advancements in AI can unlock significant productivity gains for us.” A spokesman told Reuters the company still expects total headcount to have risen by year end.
That same day, Citigroup CEO Jane Fraser told Wall Street analysts about the many ways in which the company is finding abundant efficiencies with AI. Just one use, involving software production, “saves considerable time and creates around 100,000 hours of weekly capacity,” she said. “That’s a very meaningful productivity uplift.”
Next day: An analyst asked Bank of America CEO Brian Moynihan about AI as an efficiency driver for the company. Moynihan said the company was using it in just that way. “If we had 285,000 people 15 years ago,” he said, “we have 213,000 people [now].” Those far fewer employees today are producing much, much better performance: The bank’s net income 15 years ago was a loss of $2 billion; last year, with 25% fewer workers, it was a profit of $27 billion.
History tells us not to worry. General purpose technologies such as AI don’t come around very often, but when they do, they always eliminate vast swaths of jobs. Panic ensues. Then unlimited human creativity invents new jobs that deliver more value overall, and living standards rise.
The process may take many years, but it has never failed us. Now AI, with its promise of developing intelligence greater than our own, forces us to confront a momentous question: Is this time different?
Written by Geoff Colvin for Fortune as “A recession could test whether AI is truly fueling an economy with ‘jobless growth’” and republished with permission.
