The AI Economy
How the US economy has risen and fallen with the dawn of AI.
AI is everywhere now. Whether you are a tech enthusiast or just someone who casually uses social media, the presence of AI is demonstrably inescapable. Most people’s experience with AI is via humor from generated images of celebrities or politicians or short-form videos. There’s also the nefarious threat of the ever-evolving AI videos becoming impossible to tell from genuine footage, unless checked first or verified. Either way, you’re familiar with it. But this is only the tip of the iceberg. Making cheap rip-offs of films you like or presenting President Trump as a cartoon character is not what makes AI revolutionary. All of the film producers, screenwriters, and actors who complained that AI would ruin their industry, I think, were wrong. AI has its limits on the creative field, and it’s proven to be best used for mockery, humor, or false news, not replacing actual production talent.
The real power of AI is in the workforce, and more specifically, the impact it has on the American economy.
The S&P500, which more or less tracks the economy by following the top 500 US companies, has seen a tremendous surge in the last couple of years. At the same time, however, jobs are at their absolute lowest. Specifically white-collar finance, accounting, IT, computer engineering, and your basic business analyst jobs. These roles have been decimated beyond recognition, and it shows in post-college employment rates, or at least the types of jobs people are getting. Too many young men and women received degrees in Finance or related fields and are being fazed out of the hiring process, competing with their peers as well as a changing workplace environment post-COVID, and now, AI. Hold on, though: didn’t I just say the economy was booming? If so, how can jobs opening continue to collapse?
Take a closer look at “the economy”. The S&P500 tracks the top 500 companies, like I explained. Within that, there are a variety of different industries you can divide them by. If you just divide them by Tech versus all other industries, you’d notice how uneven and explosive this growth truly is. All industries aside from tech/AI are either stagnant or slightly sluggish, whereas AI has skyrocketed the Nasdaq or Tech industry so far ahead that they are pulling the entire economy with them.
AI does not necessarily replace all jobs, or even most. It didn’t work well for analyst positions and numbers jobs via computer engineering because those can easily be automated by AI, or have AI at least complement 1 worker instead of 4. Those were already highly-competitive positions to begin with. What AI does is a bit more complex. It surges our economy upward without providing new jobs to fill that gap. And in fact, it’s the secondary causes of new AI business that hurt jobs more. The building of AI super centers requires men and women to actually construct it, but once it’s running, it needs only a handful of people to monitor it.
These are buildings the size of football fields multiple stories tall where almost no one is actually employed. With no one commuting there, there’s no need for stores on the way to the site. With no one working inside it or near it, there’s no need for stores nearby it either, and so an entire mini job ecosystem that you’d usually have, vanishes, taking with it not only the thousands of workers who would go there, but the surrounding companies as well and all of their workers.
So you have this bizarre situation today where we’re building gargantuan centers for AI to operate in, which cost money and actually take up a lot of space that are no longer be livable nearby, without producing any new jobs. It’s like an inverted version of the old factory-towns. You used to have a factory come to a tiny town, or maybe to no town, and the town would spring to life around the factory. It would employ tens of thousands of locals, and then thousands more would move in to open up restaurants, grocery stores, markets, a mall, a school, in order to fill the needs of those workers and their families. Now you don’t.
The growth of the economy is good for investors like myself in the long term, but in the short term this is no solution for the work force. People are without jobs at a record rate, not just due to deportations but also due to the enormous government slashes Elon Musk did via the short-lived DOGE operations. Nearly 300,000 people lost their jobs. You’re probably competing with them, too. To make matters worse, those people aren’t applying to the exact same job descriptions they used to hold. Those positions got taken over by AI and the new “efficient” government. So now they’re pivoting, and suddenly people from all corners of the nation are applying for an ever-vanishing portion of the previously-available jobs. AI isn’t about having a fictitious robot hand you a hamburger (we’ve had that for years at all fast food places already), the real cause for alarm is the rate at which its causing the economy to flourish, which causes more investments, all the while zero new jobs are being added to the table.
The non-tech industries of the American economy need to push through and get back some of their growth, and much of that has to do with interest rates, borrowing frequency and quantity, and how smaller businesses spend their money.