- More AI-fueled job cuts are likely, Mark Zandi says.
- The economist said he believes businesses are approaching a "Cortes moment" with AI adoption.
- Block's recent layoffs show that firms will be rewarded if they slash workers to boost margins.
America's job market looks like it's approaching a tipping point, according to Moody's Analytics' top economist.
Mark Zandi said he believes the labor market is approaching a situation that will likely lead to job losses stemming from AI. In a post on X, Zandi said that was his takeaway after Block, Jack Dorsey's fintech giant, axed 40% of its workforce last week, sending shares of the company up as much as 20%. Dorsey pointed to AI as part of the reason the company made the decision to slash headcount.
The stock move shows that companies "will be rewarded if they follow suit," Zandi said.
"Businesses appear to be nearing a Cortes moment with artificial intelligence," Zandi said on Tuesday, referring to the 16th-century military leader Hernán Cortés, who ordered his army to burn their ships after landing in Mexico to remove the possibility of return.
"AI is already weighing on the job market, but we know this is due to weaker hiring, not layoffs. But if businesses believe there is no going back on #AI, and cut workers as Block did, outright job losses appear increasingly likely," he wrote.
Fears of further AI job cuts have picked up steam in recent weeks, particularly after report from Citrini Research went viral last week. It envisioned a scenario in which AI causes unemployment to rise above 10%, with widespread white-collar job losses fueling a stock-market crash.
While the jobless rate has held steady at around 4%, markets are cognizant that the labor market is on a weaker footing, with hiring trending lower while layoffs crept higher in the past year.
Employers announced over 108,000 planned job cuts at the start of the year, according to the latest Challenger, Gray & Christmas report, marking the worst January for layoffs since the Great Financial Crisis.
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