AI Could Soon Upset the Entire Employment Picture
Last week, the Bureau of Labor announced that the U.S. economy added 256,000 jobs in December— far surpassing the 165,000 new roles economists anticipated. On the surface, it is good news, but reactions were mixed.
Stocks and bonds plunged because job growth means the Federal Reserve is less likely to initiate additional interest rate cuts this spring. Others, meanwhile, found reasons to celebrate.
According to The New York Times, analysts were “blown away” by the report, because the December surge broke a long-standing trend where employment gains lagged expectations. Pundits also say it's likely that the incoming Trump administration will be thrilled to inherit an unemployment rate of 4.1 percent later this month.
Grim Employment News Lay Ahead
The incoming administration might be wise to celebrate the good employment news while it lasts, because only hours before the BLS shared its findings, Bloomberg Intelligence, released a report indicating a grimmer employment picture lies ahead — at least for bank employees. And its findings paint a much different labor picture — one that will likely impact nearly every industry.
According to Bloomberg, leading Wall Street financial institutions — including Citigroup, JPMorgan and Goldman Sachs — are planning to eliminate as many as 200,000 jobs over the next three to five years because artificial intelligence (AI) will render those roles obsolete. These findings are based on surveys Bloomberg conducted with top banking executives who say the cuts could go as deep as 5 percent to 10 percent of their workforce.
According to Forbes, “the impending job cuts are expected to primarily affect back-office, middle-office and operational departments, where routine and repetitive tasks are prevalent. Positions involving data analysis, financial trend assessment and risk evaluation are particularly vulnerable, as AI systems can process vast amounts of information and generate insights at speeds far surpassing human capabilities.”
This shouldn’t come as news to anyone who has watched the relationship between banking and artificial intelligence grow. AI has already gained a significant foothold in banking. Last year, Oracle announced that HSBC, Deutsche Bank, Royal Bank of Canada were deploying AI to “help manage back-office functions, including rooting out credit card fraud, green-lighting lending, guiding client teams and writing computer code.” In March, JPMorgan introduced an AI-supported banking tool to 2,500 of its customers.
Going back slightly further, in 2023 The McKinsey Global Institute looked at 63 different industries to determine which ones offered the most promising AI-use cases and found “banking is … one of the largest opportunities.” According to their data, the productivity value that AI will soon bring to banking will be between $200 billion to $340 billion, which is the “equivalent to 9-to-15 percent of operating profits” for the industry.
What AI Means for the Job Picture
Banking is only one industry that will likely see AI-related job cuts, McKinsey estimates.
So even though the banking industry appears to be especially susceptible to AI-driven labor reductions, most industries will eventually be impacted by layoffs brought on by AI. The media has already picked up on this trend, citing a study from the World Economic Forum (WEF) that found that 41 percent of organizations worldwide plan to cut workforces before 2030 due to AI.
While it’s true that the WEF found that 92 million roles around the world will be displaced by AI during the next five years, that glass-half-empty reporting fails to acknowledge the WEF’s main finding, which is that AI could be responsible for creating 170 million new jobs globally by 2030. In other words, there could be as many as 78 million net new jobs available in the years to come.
The WEF’s findings likely bring little comfort to those bank employees concerned about their employment picture, but the overall findings illustrate where the world is heading as corporations around the world embrace AI.
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