There’s one group of workers that could be in for a particularly rough time as AI becomes more integrated into the economy.
Murat Tasci, a senior US economist at JPMorgan, thinks AI is poised to replace a vast swath of white-collar knowledge workers — office workers, in other words, who have “non-routine cognitive occupations,” the bank wrote in a note to clients last week.
The result could be a “jobless recovery” in the labor market — a situation where white-collar knowledge workers face a structurally higher risk of unemployment as growth in their sector remains feeble, Tasci said.
The shift could also pose a huge risk to the overall economy, Tasci suggested, given that white-collar knowledge workers account for around 45% of all household employment in the US.
“A much larger unemployment risk and anemic recovery prospects for these workers might cause the next labor market downturn to look pretty dismal,” Tasci wrote, speculating that policy makers may need to significantly ease monetary policy or inject the economy with stimulus as workers adjust to changes in the job market.
The idea that AI could be taking away some white-collar jobs has been on Wall Street’s radar for a while, but there are signs that the trend may already be beginning to play out in some areas of the job market, Tasci said, such as for entry-level workers.
The rising jobless rate among recent college graduates is related to the hype for AI, JPMorgan said previously.
The share of unemployment accounted for by non-routine cognitive workers has also already surpassed the share of unemployment accounted for by routine workers in recent years, per JPMorgan’s analysis.
Non-routine cognitive workers now account for a larger share of unemployment than routine workers
Bureau of Labor Statistics/JPMorgan
JPMorgan says that workers in “routine cognitive occupations,” — those who have repetitive jobs in areas like sales — as well as “routine manual occupations” have already been through a jobless recovery.
The percentage of workers in the US who have a “routine” job has dropped from around 55% to 40% over the last four decades, according to the bank’s analysis of Labor Department data.
The share of US employment accounted for by workers in routine cognitive or manual jobs has fallen from 55% to 40% over the last four decades.
Bureau of Labor Statistics/JPMorgan
The impact of AI on the job market hasn’t significantly impacted employment figures yet, Tasci noted. The overall unemployment rate in the US remains near a historic low, hovering around 4.2% in July.
Related stories
Business Insider tells the innovative stories you want to know
Business Insider tells the innovative stories you want to know
Still, he said the bank believed the pressures on white-collar knowledge workers could build over time.
“More importantly for this note, disappearing routine jobs have a pronounced cyclical behavior. Throughout recessions over the past four decades, it took increasingly longer to recover from recession-induced job losses in routine occupations,” Tasci said.
“We are not seeing an imminent downturn in the labor market, though the risks are higher relative to a month ago,” he later added.
The job market has flashed signs of weakening in recent months. The US added far fewer jobs than expected over the month of July, while job gains over the months of May and June were revised downward by a combined 258,000.