Last week I wrote about the Black Swan framework of societal change, and warned that once you become familiar with the concept, it’s easy to see Black Swans wherever you look, even though they probably aren’t there. Well today, I’m going to recklessly do what I warned not to last week, and that is pontificate about the perils lurking in the job market, and how aspects of the recent softening there feel more like systemic change versus just the usual ebbs and flows of the economic cycle.
This has been troubling me for much of the past year now, for the sake of people looking for (and needing) work, but also for the long-term implications for ourselves as a society. Not to be overly dramatic here, but whether you call it the social contract, the American Dream, or just the way we get by, there is a general understanding here in the United States (and beyond) that if you work hard and play by the rules, you will be able to provide for yourself and your family and, hopefully, get ahead. But what happens if the mechanisms to earn money, the avenues to get ahead, are simply not there? What happens if there are not enough jobs for people?
What the Data Says
A key jobs report was released this past week with troves of data, much of it worrisome. In August, the U.S. economy added just 22,000 jobs, a tepid gain compared with expectations that approximately 75,000 jobs would be created. The unemployment rate rose slightly to 4.3%, which is still low by historical standards, but the number of people applying for unemployment benefits rose to a nearly four-year high with 263,000 filings for the week ending September 6th. The week also saw the largest week-over-week increase in almost a year.
Casting further shadows on the labor landscape were a series of downward revisions to previous jobs reports. Job growth estimates were amended lower for the 12-month period ending March 2025, with about 911,000 fewer jobs added than were previously reported.
The labor market has clearly lost momentum. The downward revisions matter: they indicate that earlier snapshots painted a more robust picture than the underlying data supported. The weak job gains in August, combined with the unemployment rate increasing modestly, combined with the downward revisions of earlier snapshots, all point to a cooling. In the downward revisions, the biggest reductions were in leisure and hospitality (-176,000), professional and business services (-158,000) and retail trade (-126,200). Government jobs were down by 31,000. Warehousing and transportation and utilities all showed modest gains, but mostly, the job market is softening across the board.
The implications from the poor jobs numbers are significant, especially with the ongoing question of whether interest rates should be brought lower by the Federal Reserve and what the timing and magnitude of those cuts should be. The Fed meets next week to decide the next move. The weak labor report lends support to interest rate reductions, which are almost sure to happen next week.
The Deeper Picture
You can make a case, for sure, that we have been due for an economic downturn, which would include job losses. It would not be abnormal to have a softening labor market after several years of growth and relative stability. And truth be told, that is probably part of the story here. Interest rates have been high for over a year now, which has slowed down business activity, and surely resulted in some job cuts.
But I believe there is more going on here. The New York Times had a piece a few weeks ago (that unfortunately is paywalled, so you may not be able to read it), about students graduating from college and not being able to find jobs. But these are not just any students, they are computer science graduates, many of whom had been told from a young age things like, “Learn to code,” and to focus on the STEM fields. The New York Post also covered the story, with this key fact:
According to the Federal Reserve Bank of New York, the unemployment rate for recent computer science graduates is 6.1%, and 7.5% for computer engineering majors — both above the 5.3% average for all recent graduates and roughly double the 3% rate for majors like biology and art history.
Just a few years ago, computer science graduates may have been competing over $165,000 job offers, so the article says, and now, at least in one anecdotal case, the only job offer they got was from Chipotle.
Dario Amodei, CEO of Anthropic, one of the top AI firms in the marketplace today, has said that AI could eliminate half of entry-level white-collar jobs. But here is the kicker: he is not talking about some point in the distant future — he is saying this could happen within one to five years. This would push the unemployment rate to 10-20%, Amodei told Axios in an interview earlier this year, saying, “Most [people] are unaware that this is about to happen. It sounds crazy, and people just don't believe it.”
This is already happening. Many CEOs and boards of directors are still feeling things out, but others have been explicit that they are cutting positions due to enhancements and efficiencies from AI:
IBM cut approximately 200 jobs in HR, saying the work could be handled by chatbots and other AI tools.
Procter and Gamble plans to cut approximately 7,000 jobs, citing AI.
Recruit Holdings eliminated 1,300 jobs, pointing to an increased share of its coding work being done through AI.
Workday cut 1,750 jobs, specifically referencing “investments in artificial intelligence.”
Autodesk cut 1,350 jobs, also tied to accelerated AI investments.
Honestly, the list could go on and on. But really, the examples above are only from companies whose leadership teams have specifically referenced AI. Other companies have cut jobs and used vague terms like “restructuring” or “strategic alignment,” or perhaps by referencing “streamlining” and “efficiencies.”
More of this is coming over the next few years, there is no doubt about it. And where will that leave us?
The complexity of the issues society might face with elevated unemployment as jobs are lost through technological advancement is beyond the scope of today’s article, but I will surely come back to them. This is really starting to feel like the major socioeconomic issue of our time, and one that will touch on virtually all aspects of American (and, indeed, global) life. For this week, if you are particularly interested in this topic, I would commend to you the Axios write-up of their interview with Dario Amodei, which I consider a must-read for anyone who is concerned about these questions. You can find it here.
Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com.
Thanks a lot, Ben, for adding to my deep concerns. As if the political and tribal landscapes weren't bad enough. Now there may be new fertilizer to spread on the "gardens" of conspiracy theories and people to blame. And we have children and grandchildren...