This week’s jobs report wasn’t just weak—it may be the early signal of something deeper: a turning point in labor demand. As full-time employment contracts and firms pull back hiring, we may be watching the front edge of AI-driven displacement arrive in real time. Goldman Sachs now estimates that hundreds of job categories, from credit analysts to customer service reps, are at heightened risk of automation as generative AI becomes cheaper, faster, and more capable.

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Traditionally, global firms outsourced labor to cheaper markets to cut costs. But that model is breaking down. With rising tariffs and geopolitical fragmentation, the incentive to offshore is weakening—making domestic automation even more attractive. AI becomes the new cheap labor. Unlike human workers, it doesn’t require visas, wage negotiations, sick days or health insurance—and it doesn’t strike (yet).
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While AI is often celebrated for its productivity gains and deflationary pull, the mechanism is sobering: fewer people earning wages means less aggregate demand. Fewer buyers equals less pricing power—goods get cheaper not because supply improves, but because demand erodes. This is how deflationary stabilization through automation can mask economic fragility.
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The IMF estimates that 60% of jobs in advanced economies are exposed to AI. In the U.S., that exposure now coincides with a sharp native-born hiring spike, a plunge in foreign-born employment, and broad employer reluctance to invest in headcount. The result? A labor market that looks tight only on the surface, while silently absorbing a profound shift in who—and what—does the work.
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And that backdrop leads straight into tariffs—because as the U.S. and its trading partners escalate protectionist moves, AI becomes not just a labor solution, but a strategic imperative. The only way to offset higher prices caused by tariffs, is to cut costs internally. There are two ways to do that: fire people and increase productivity through AI.