Artificial intelligence is reshaping the economy at a pace that’s difficult to fully grasp. Capital Group takes a closer look at what AI’s rise really means for the workforce and the broader economy.

“Ask ChatGPT whether layoffs at Big Tech companies are a preview of what’s coming for everyone else, and its answer is as clear as mud: Not yet. But the warning signs are real.

Companies outside the tech sector are using artificial intelligence for a growing list of tasks, from reading legal documents, to creating marketing materials, and even conducting job interviews. Whether that’s enhancing or replacing human work is a question our economists and portfolio managers are grappling with.

Instead, AI is likely to drive faster economic growth and a surge of new businesses. “As a telecom analyst in the late 1990s, I saw the internet create all kinds of new companies and jobs. It was unimaginable that Amazon would become a retail giant, Netflix would overtake much of the media industry, or online advertising would surpass traditional channels,” Buchbinder explains. “We’re at that same stage now. The next generation of AI companies and use cases will be just as hard to predict and just as transformative.”

Most industries bolt new tech to old systems
Technological advances rarely change industries overnight. It took a pandemic for widespread adoption of video conferencing, a technology that AT&T debuted in 1927 and improved upon into the 1990s. “There is plenty of technology available that industries and companies aren’t using because integration with the real world is messy and often requires rethinking entire business processes,” says economist Jared Franz.

Companies have bottlenecks to widespread AI adoption
It may be hard for AI to devour certain jobs simply because there are too many bottlenecks across corporate America. “Workers may draft, code, summarize and screen faster, but they may still be constrained by bottlenecks such as industry or government regulation, physical capacity and management bandwidth,” Franz explains. “A worker that is twice as productive doesn’t make a company twice as productive.”

AI systems are nowhere near human intelligence
In certain tests, AI systems can outperform humans with PhDs, but that is not the kind of intelligence that replaces human work, according to Mark Casey. “AI systems are pattern recognizers and producers. They don’t have a grasp of what a bicycle or bicycle seat is. They’re making statistically valid guesses, but they’re still guesses.”

Most layoffs aren’t AI-related
Warnings of an AI-fueled jobs apocalypse are likely overstated. “We are still in the early stages of AI implementation, and many companies don’t know what the impact will be on employee productivity,” says Steve Watson. “I would take announcements of AI-related job losses with a dose of skepticism. Generally, the reasons for head count reductions are less about AI and more about business fundamentals, including increased competition and higher cost pressures.”

Vibe coding has its limits
The impact of AI on the labor market is a theme that touches every business, sector and geography. For consulting and software companies, there are existential questions about whether their customer base will continue to outsource, says Rob Lovelace.

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The AI revolution is still in its early chapters. But what’s clear is that staying informed and proactive is more important than ever. Whether you’re thinking about how market shifts could impact your portfolio, or simply want to talk through what these changes mean for your financial future, we’re here to help. Schedule a complimentary consultation with us today and let’s build a financial plan for what’s ahead.

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