Episode summary
AI and Jobs: What Data and History Say
Thoughts on the Market (Morgan Stanley)
· · 5 min · Hosts: Seth Carpenter
Summary
Seth Carpenter argues that AI is more likely to boost productivity than trigger an immediate broad labor-market shock, at least based on the current evidence. He says the key question is not whether AI can replace tasks, but whether the economy can absorb the efficiency gains through more output, higher incomes, and new work rather than fewer jobs.
Carpenter says the data are still “cautious[ly]” encouraging: labor-market indicators show little disruption, while productivity is improving most in AI-exposed industries through faster output growth rather than reduced hours. He also points to a major physical constraint on adoption, noting that more than $3 trillion in expected data-center and related capex from 2025 through 2028 has only partly been deployed so far.
He acknowledges some job losses are likely and that AI could compress the adjustment period compared with past technology waves. But he argues that central banks and fiscal policymakers would likely respond if employment weakens, making any rise in unemployment smaller and shorter-lived. His bottom line is that the pace of adoption versus the economy’s ability to adapt will decide how disruptive AI becomes.
Key takeaways
- Carpenter says the evidence so far supports “cautious optimism” because AI-exposed industries are seeing stronger labor productivity gains without broad labor-market disruption.
- He argues the main risk is speed: AI could destroy jobs faster than new ones are created, even if the long-run effect is higher output and employment.
- Morgan Stanley research finds more than $3 trillion in expected data-center and related infrastructure capex from 2025 through 2028, with only about a quarter deployed so far.
- Carpenter says any AI-driven rise in unemployment should be cushioned by central-bank easing and, if needed, fiscal support.
- He expects the biggest productivity gains are still ahead, but says not everyone will benefit equally and transitions may be uneven.
Notable quotes
“the broad labor market indicators still show remarkably little disruption”
“industries with higher AI exposures have recorded stronger labor productivity gains driven mainly by faster output growth rather than fewer hours worked”
“Of the more than $3 trillion in expected data center and related infrastructure capex from 2025 through 2028, only about a quarter of that has been deployed so far”
“The biggest productivity gains from my perspective are likely still ahead of us”
“AI's labor market impact is not predetermined. The debate will almost certainly come down to speed”
How the episode opens
Welcome to Thoughts in the Market. I'm Seth Carpenter, Morgan Stanley's global chief economist and head of macro research. And today, we're going to try to look past the hype and the anxiety around AI and ask, what will be the effect on the labor market?
It's Friday, May 1st at 10 a.m. in New York. Now, odds are that you've used AI to draft an email or summarize a document, maybe learn about a new topic, help plan a trip.
The new technology is clearly lowering the cost of certain tasks and I think the research shows that there are plenty and an increasing number of tasks that AI can do better than most humans. But that's not really the question. What I hear all the time is well if we can get the same amount of output with less labor then surely millions of people will lose their job.
I think the same logic also implies that we can just get a lot more output from the economy using all the labor that we have. And the difference between those two views really is at the heart of the debate. So far, I would say the data allow for some cautious optimism.
Despite rapid advances in AI capability and evidence that adoption is spreading, the broad labor market indicators still show remarkably little disruption. Now, productivity data are beginning to show perhaps a bit of AI's positive effects, but they don't show the mass displacement that many people fear. According to our research, industries with higher AI exposures have recorded stronger labor productivity gains driven mainly by faster output growth rather than fewer hours worked.
And that distinction for me is critical. So far, the evidence looks like workers are producing more than firms are cutting back on labor.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai and jobs
- productivity boom
- labor market shock
- economic adaptation
- data and history
Watch the episode
Watch “AI and Jobs: What Data and History Say” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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