The U.S. job market appears to be nearing a tipping point, according to top economists at Moody’s Analytics.
Mark Zandi said he believes the labor market is approaching a situation where AI is likely to lead to job losses. In a post on X, Zandi said this was his takeaway after Jack Dorsey’s fintech giant Block laid off 40% of its workforce last week and its stock price rose 20%. Dorsey cited AI as part of the reason the company decided to cut jobs.
Zandi said the stock price movement shows that companies “will be rewarded for following.”
“Companies seem to be approaching the Cortés era of artificial intelligence,” Zandi said on Tuesday, referring to Hernán Cortés, the 16th-century military leader who ordered his troops to burn ships after landing in Mexico to eliminate the possibility of repatriation.
“AI is already weighing on the job market, and we know this is due to a downturn in employment rather than layoffs. But if companies believe there is no turning back for AI and cut workforces like Brock, it looks increasingly likely that jobs will be completely eliminated,” he wrote.
Concerns about further AI job cuts have grown in recent weeks, especially after the Citrini Research report went viral last week. It envisions a scenario in which AI causes unemployment to rise above 10%, with widespread white-collar job losses fueling a stock market crash.
Although the unemployment rate has stabilized at around 4%, the market recognizes that the fundamentals of the labor market are weakening, with layoffs increasing and employment declining over the past year.
Employers announced plans to cut more than 108,000 jobs at the start of the year, making it the worst January layoff since the Great Financial Crisis, according to the latest Challenger, Gray & Christmas report.
