AI's Impact on US Employment: The Next Great Job Churn

AI's Emerging Impact on US Employment Landscape

The United States is witnessing a significant shift in its employment geography, driven by two distinct trends: reduced interstate migration and the growing influence of artificial intelligence (AI) on hiring practices. While overall job growth remains close to pre-pandemic levels, with US employment growing 1.2% in April year-over-year compared to 1.3% in 2019, the distribution of this growth is changing dramatically 1

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Reduced Interstate Migration and Regional Job Growth

The first trend shaping employment geography is the low level of housing churn and interstate migration. This phenomenon, typically part of the business cycle, is affecting job growth in different regions:

• Warm states like Texas and Florida are experiencing slower job growth. Dallas saw employment growth of 1.4% in March, about half its 2019 pace, while Tampa's growth was just 0.9%, a third of its 2019 rate 2

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• Conversely, reduced outmigration from the Northeast and Midwest has boosted job growth in cities like Buffalo, New York, and Pittsburgh, Pennsylvania, surpassing their pre-pandemic pace 2

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AI's Suppression of Hiring in Tech Hubs

More consequential is the emerging trend of AI suppressing hiring in technology-centric regions, particularly the San Francisco Bay Area. Despite massive investments in AI by tech giants, employment in this region has been declining since November 2022, coinciding with the launch of OpenAI's ChatGPT 1

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Key observations include:

• White-collar jobs shrinking fastest in the US include software engineers, data engineers, and application engineers 2

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• Job postings for software engineers on recruitment sites like Indeed are currently lower than in spring 2020 2

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• Boston, another knowledge job-centric metro area, is showing signs of labor market softness with rising unemployment rates 2

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Potential for Structural Change in the Labor Market

Researchers from Louisiana State University and MIT suggest that metro areas with high educational attainment and high living costs are most vulnerable to AI disruption. This situation draws parallels with the 1980s when manufacturing-centric communities were hit hardest by automation and globalization 2

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However, this doesn't necessarily spell doom for tech hubs like San Francisco:

• The region remains at the forefront of AI innovation.
• There's potential for AI-enhanced knowledge work to replace traditional software development jobs.
• The AI shock could lead to more balanced economic development across the US, similar to how the manufacturing shock benefited the southern US 2

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Policy Implications and Future Outlook

As signs of another labor-market reordering emerge, policymakers at local and national levels need to take the potential for AI disruption seriously. The impact of AI on employment patterns could be as significant as the manufacturing job losses of the past, requiring proactive measures to manage the transition and ensure balanced economic development across the country 2

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While the full extent of AI's impact on the job market is yet to unfold, it's clear that we are witnessing the early stages of what could be the next great job churn in the United States. As AI continues to evolve and integrate into various sectors, its influence on employment trends and economic development will likely become even more pronounced in the coming years.