When the next economic downturn hits – whether it's just beginning or still years off – we could see a massive bloodbath for millions of workers whose jobs are vulnerable to AI replacement.
In past recessions, companies saw tough times as the perfect opportunity to ramp up automation. They used the slowdown to permanently replace workers with technology, cutting their long-term labor costs. If history repeats itself, the rise of AI could make this next downturn *especially* brutal for jobs.
If last week's weak jobs numbers were a warning sign of broader trouble, the timing couldn't be worse. We're in the middle of this massive AI revolution, and that could make the pain much deeper.
When the economy gets tough, companies get desperate to cut costs. Replacing expensive workers with tech suddenly becomes a top priority. We saw this before with manufacturing: US factory jobs plummeted 26% between 2000 and 2019, largely due to automation. But it wasn't a steady decline – the biggest drops happened right *during* and right *after* the 2001 and 2008 recessions. Jobs were steadier in the good years in between.
**What this means for white-collar jobs:** If AI starts replacing office workers like it replaced factory workers, this pattern suggests the real job carnage will hit hardest when the economy is already struggling.
**The scary part:** This helps explain why recessions in 1991, 2001, and 2008 had such "jobless recoveries." The economy started growing again (GDP bounced back), but jobs just didn't come back for years. Companies had used the downturn to permanently replace workers with machines or software.
**What experts are saying:** JPMorgan economist Murat Tasci puts it bluntly: During the next recession, companies might rush to adopt AI tools so fast that it could wipe out huge numbers of white-collar jobs – the kind involving thinking, problem-solving, and creative tasks. Why? Because recessions are actually the *cheapest* time for companies to make the switch to automation. When business is slow anyway, the cost of disrupting things to install new tech is much lower.
**The big worry:** Tasci warns that traditional government fixes for recessions – like interest rate cuts or stimulus spending – might not work like they used to. They'll be fighting against this new wave of AI-driven job losses.
**Even the Fed is nervous:** This isn't just fringe theory. Federal Reserve Governor Lisa Cook recently said AI could fundamentally reshape the job market, changing how we think about "full employment." She acknowledged, "As with many technological breakthroughs, a certain set of jobs may be replaced. We must recognize the challenges and potential pain this may bring, and we are watching this closely."
The next recession might not just be a temporary dip. It could be the moment AI permanently changes the employment landscape for millions of workers.
- Unemployment among Gen Z workers in the tech sector has risen faster than that in the broader tech industry and among young workers overall, according to Joseph Briggs, senior global economist of Goldman Sachs’ research division. In a recent podcast episode, Briggs warned that young people in tech are the largest targets for workforce displacement as a result of AI.
As artificial intelligence begins to jostle the labor market, it’s Gen Z tech workers who are at the greatest risk of being displaced by the technology, one Goldman Sachs economist warns.
The unemployment rate for young people between 20 to 30 years old in the tech sector has increased by about 3% since the beginning of the year, according to Joseph Briggs, senior global economist of Goldman Sachs’ research division.
“This is a much larger increase than we’ve seen [in] the tech sector more broadly or a larger increase than we’ve seen for other young workers,” Briggs said in an episode of the bank’s “Goldman Sachs Exchanges” podcast that aired Tuesday.
AI adoption in the workplace so far has been modest: About 9% of companies have used the technology regularly for the production of goods or services in the past two weeks, according to Goldman Sachs’ recent report, “Quantifying the Risks of AI-Related Job Displacement,” co-authored by Briggs. However, employment in the tech sector has dipped in the last few years, coinciding with the release of OpenAI’s ChatGPT, disrupting more than 20 years of consistent job growth in the industry.
The bank predicts AI will displace about 6-7% of the total workforce.
The proliferation of AI adoption is bound to have an outsized impact on the tech industry, with Microsoft, Google, Meta, and other tech giants laying off a nearly 30,000 workers collectively as they shift investments toward AI. But while millennials were the learn-to-code generation, new-to-the-workforce Gen Z is striking out on tech jobs. Beyond AI hurting tech-sector opportunities, the rise of automation is also disrupting entry-level positions in particular, with entry-level job postings in the U.S. diminishing by about 35% since January 2023.
Gen Z is feeling the pressure. Nearly half of Gen Z job hunters in the U.S. believe AI has reduced the value of their college degrees, according to an April World Economic Forum report.
“The story is one where the overall impacts on young workers in the labor market, speaking from an aggregate perspective, are small,” Briggs said. “But if we start zeroing in and zooming in on these specific industries where we are seeing AI be used to drive efficiency gains, there are signs that headwinds are emerging there.”
Gen Z’s broader employment woes
More broadly, young people are entering into a job market that is “low-hiring, low-firing,” Briggs argued. In other words, while AI may be changing the labor landscape, Gen Z workers must also contend with a job market less friendly to new hires.
“There’s been a lot of questions around the lagged hiring rates or the difficulties facing recent college graduates,” he said. “I’m sure that we all know people who have had trouble finding jobs or a harder time than they would have normally following recent graduations.”
Briggs said he is “definitely seeing these lower hiring rates for recent college grads.” The Federal Reserve of New York found last month that the unemployment rate among recent college grads increased to about 5.5%, which is now roughly the same rate as young men who didn’t attend college. For all young workers between 22 and 27 years old, the unemployment rate is 6.9%.
Brad DeLong, a professor of economics at the University of California, Berkeley, wrote in a recent Substack post that young people shouldn’t blame AI at all for their unemployment woes, but look to the litany of economic uncertainties—from trade wars to inflation—for reasons why they can’t get hired.
As companies adopt a wait-and-see policy as they learn more about the ramifications of President Donald Trump’s economic policies, they are not firing employees so much as just waiting to hire, DeLong argued. AI has meanwhile become a scapegoat for businesses conscious of their decisions to bide their time instead of expand, he said.
- Google X’s former chief business officer Mo Gawdat, says the notion that AI will create jobs is “100% crap,” and even warns that “incompetent CEOs” are on the chopping block. The tech guru predicts that AGI will be better at everything than most humans—echoing the likes of Google DeepMind CEO Demis Hassabis and OpenAI chief Sam Altman. Only the best workers in their fields will keep their jobs “for a while,” and even “evil” government leaders might be replaced by the robots.
Tech titans keep insisting that AI will usher in a “golden era” of humanity, where all illness is cured, people live in abundance, and workers have “superhuman” powers. But a former Google executive has slammed the notion that the technology won’t be a job-killer and will actually create new work for humans.
“My belief is it is 100% crap,” Mo Gawdat, the former chief business officer for Google X, recently said on The Diary of a CEO podcast. “The best at any job will remain. The best software developer, the one that really knows architecture, knows technology, and so on, will stay—for a while.”
Gawdat has joined the cohort of leaders waving the red flag that AI will commence a jobs armageddon within the next 5 to 15 years. Companies including Duolingo, Workday, and Klarna have already laid off staffers in droves or stopped hiring humans altogether to get ready for an AI-centric workforce.
But executives shouldn’t celebrate their efficiency gains too soon—their role is also on the chopping block, Gawdat, who worked in tech for 30 years and now writes books on AI development, cautioned.
“CEOs are celebrating that they can now get rid of people and have productivity gains and cost reductions because AI can do that job. The one thing they don’t think of is that AI will replace them, too,” Gawdat continued. “AGI is going to be better at everything than humans, including being a CEO. You really have to imagine that there will be a time when most incompetent CEOs will be replaced.”
While the vision of human-less companies solely run by robots is incredibly dystopian, the ex-Google executive isn’t afraid of what lies ahead. The 58-year-old doesn’t see AI being the perpetrator of job loss—money-hungry CEOs are actually to blame for letting the technology take over in the pursuit of financial gain, he claimed.
“There’s absolutely nothing wrong with AI—there’s a lot wrong with the value set of humanity at the age of the rise of the machines,” Gawdat said. “And the biggest value set of humanity is capitalism today. And capitalism is all about what? Labor arbitrage.”
Fortune reached out to Gawdat for comment.
For humans to thrive, ‘evil’ world leaders need to be replaced by AI
AI is already outpacing humans when it comes to some abilities—it can code, resolve customer requests, handle administrative work, and even analyze market figures. There’s no telling where its future capabilities lie.
Tech leaders like Google DeepMind CEO Demis Hassabis and OpenAI chief Sam Altman are adamant it’ll outpace even the most powerful people by 2030. And that may be a good thing for humanity: For humans to thrive in this new era, immoral corporate executives and world leaders alike need to be replaced by AI, Gawdat advised.
He said that since harmful leaders will use the tech to “magnify the evil that man can do,” technology will make for more moral world leaders—and that this dystopian scenario of AI-enabled politicians is “unavoidable”.
“The only way for us to get to a better place is for the evil people at the top to be replaced with AI,” Gawdat continued on the podcast. “[World leaders] will have to replace themselves with AI. Otherwise, they lose their advantage.”
Gawdat isn’t the only one sounding alarm bells over AI’s impact on humanity’s future. Altman and Google chief Sundar Pichai have both expressed a need for AI regulation—whether that be “major governments” drawing a line in the sand, or creating a high-level governance body to oversee potential harm.
“We are likely to eventually need something like an IAEA for superintelligence efforts,” Altman wrote in a 2023 blogpost