by Bryan Perry
March 5, 2024
The AI-led market rally of the past year is showing few signs of letting up, at least in the near term. What is becoming rapidly apparent is that the impact of AI is no fad, but rather a generational transformational technological breakthrough that is just beginning to shape the future of how America and the rest of the developed world do business and conduct everyday affairs. The pace of change is accelerating and corporations and public entities that have the budgets to implement AI are just getting started.
Case in point: One of my sons works at Teachers Insurance and Annuity Association of America (TIAA), which employs over 16,500 people. The organization, which owns Nuveen, is well known for overseeing most of America’s university pension plans, and offers retirement plans, IRAs, college savings plans, mutual funds, brokerage services and life insurance nationwide. Its 2022 revenues were just under $41 billion. A job at TIAA was always viewed as a job for life – like working at the Federal Reserve.
This past weekend, my son and I had a long discussion about the company’s new and major AI initiative that will alter the future of employment at TIAA. While most current employees that are “essential” to the company’s operations will maintain their jobs, for the time being at least, management has made it clear that they intend to spend large sums to put AI systems in place that will reduce the number of FTEs (full time employees) and increase productivity by significant margins in all their divisions. And TIAA is an established company that isn’t seasonal. It is not a company where thousands of people are hired and fired with every economic upswing and downturn, taking aggressive action to reconfigure their workforce.
According to Crunchbase, there are approximately 5,163 organizations in the U.S. with annual revenues ranging from $1 billion to $10 billion. Add on top of this, the S&P 500 along with federal and state governments – and you have a potential “perfect storm” of coming layoffs in the making.
The McKinsey Global institute estimates that by 2030, up to 30% of tasks currently performed by human office workers in the U.S. could be automated by AI. Goldman Sachs predicts that AI will disrupt 300 million jobs worldwide by 2030. According to a survey by mindandmetrics,38% of companies are likely to have layoffs in 2024, and four in 10 attribute these layoffs to replacing workers with AI.
According to the latest World Economic Forum in Davos, Switzerland, 83 million jobs could vanish in the next five years due to automation and AI. When using Copilot ChatGPT to inquire about which are the most likely jobs AI will replace, it quickly identifies the following as the jobs most threatened by AI:
And now here’s the good news (please note – I’m writing this transition – NOT an “AI” bot!)
These lists just scratch the surface of how AI-assisted robotic systems will replace millions of other jobs, in time, including retail store workers, quick serve restaurants, warehouse workers… the whole self-serve world is about to undergo exponential growth with companies radically reducing the size of their HR departments, slashing budgets for salaries, bonuses, stock options, healthcare, paid leave, matching contributions for 401K plans, food services, and other people-related expenses.
This wave of change will no doubt trigger a boom in new job training in those fields where AI doesn’t eliminate one’s occupation. And there will be no crocodile tears from most Americans if AI can shrink the size of federal and state government workforces by 50%, which would lead to the greatest government spending cuts of all time. Want to cut spending and work toward balancing the budget while maintaining full social benefits? Start with slashing the number of overpaid bureaucrats with bloated benefits.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
As of January 2024, there are 20.54 million people working for a federal, state or local government, and 167 million in the labor force outside government. Since 2018, the population in the U.S. has grown by less than five million people, or 1.5%, not counting the flood of illegal immigrants, to around 335 million legal citizens. And yet the number of government employees at all levels has grown by a bloated 10%.
In the past four years, federal, state, and local governments have played a notable role in job creation, particularly during the first half of 2023, when 379,000 new government hires accounted for nearly one-quarter of the 1.7 million new jobs. If this is Bidenomics, then we need to redefine what real job growth is, because it isn’t happening at a strong enough rate within the sectors that generate taxable revenue.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
To sum up, AI, for all its pros and cons, is going to be the most disruptive force in the labor market during our lifetime, at least as far as I can tell from reading all the data. It also means that companies will generate wider profit margins from every dollar of goods and services sold, which should translate into higher earnings for the S&P 500 while also generating a long-term deflationary pull on nearly everything.
How this plays out is to be determined, but it sure looks like the way forward from what we now know.
All content above represents the opinion of Bryan Perry of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
What Could Go Wrong After This Super Start to 2024?
Income Mail by Bryan Perry
The Coming Tidal Wave of AI-Driven Layoffs
Growth Mail by Gary Alexander
The U.S. Growth Machine Will Likely Rescue the World (Again)
Global Mail by Ivan Martchev
Small Caps are Due to Move Violently to the Upside
Sector Spotlight by Jason Bodner
When Reality and Perfect Planning Clash, Trust Reality
View Full Archive
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Bryan Perry
SENIOR DIRECTOR
Bryan Perry is a Senior Director with Navellier Private Client Group, advising and facilitating high net worth investors in the pursuit of their financial goals.
Bryan’s financial services career spanning the past three decades includes over 20 years of wealth management experience with Wall Street firms that include Bear Stearns, Lehman Brothers and Paine Webber, working with both retail and institutional clients. Bryan earned a B.A. in Political Science from Virginia Polytechnic Institute & State University and currently holds a Series 65 license. All content of “Income Mail” represents the opinion of Bryan Perry
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