John Rapley is a contributing columnist for The Globe and Mail. He is an author and academic whose books include Why Empires Fall and Twilight of the Money Gods.<\/p>\n
After the Bank of Canada voted to keep interest rates steady<\/a> on Wednesday, Governor Tiff Macklem noted that \u201cthe unemployment rate remains high at 6.8 per cent, youth unemployment is particularly elevated and relatively few businesses say they plan to hire more workers in coming months.\u201d<\/p>\n It\u2019s a tough job market, alright, not least for new graduates. Anecdotal evidence lays the blame on AI<\/a>. Although it isn\u2019t yet replacing workers on a large scale, firms are nonetheless saying it\u2019ll reduce their future need for workers. After Amazon announced it would eliminate 30,000 jobs last year, blaming AI, a working paper out of Harvard revealed that AI-adopting firms were cutting new hires, all while keeping existing staff: They needed senior employees to continue doing quality-control, but didn\u2019t require junior hires since AI could produce similar outputs.<\/p>\n<\/p>\n But you don\u2019t have to drill deep into these reports to find something which doesn\u2019t quite compute. Although surveys of employers indeed find them planning to slow hiring owing to AI, the actual job numbers don\u2019t yet show a link between AI adoption and reduced employment. Last year in the U.S., for instance, one study found that fewer than 5 per cent of layoffs resulted from AI adoption.<\/p>\n Amazon itself admitted that its retrenchment was a rollback of the excessive recruitment during the pandemic, while the Harvard study\u2019s data revealed the trend toward layoffs existed whether or not firms were adopting AI. That would seem to suggest that the real cause of the hiring freeze was macroeconomic. Recent studies by Yale\u2019s Budget Lab and reporting from the Financial Times similarly found little disruptive impact so far from AI. Most of last year\u2019s layoffs resulted instead from a cyclical slowdown in the economy.<\/p>\n But while AI may not be the culprit in today\u2019s bad job market, the AI bubble might. Although U.S. GDP growth remains strong, it\u2019s primarily because so much capital is flowing into the AI sector, driving up share prices and sustaining consumption among the rich. But in the rest of the economy, hiring has stopped, wage growth is slowing, prices are rising and consumer confidence is plumbing record lows. <\/p>\n Add in the volatility of the Trump administration\u2019s policy making and the fact that employers in most of the economy are holding off hiring or expansion plans. That, in turn, is affecting the U.S.\u2019s major trading partners, not least Canada.<\/p>\n