AI and the Labor Market: Historical Data Offers Mixed Signals

In a recent episode of Morgan Stanley's 'Thoughts on the Market' podcast, Global Chief Economist Seth Carpenter examined whether the economy can adapt quickly enough to turn artificial intelligence into a productivity boom rather than a labor market shock. Drawing on historical data, Carpenter noted that past technological shifts—such as industrialization and the rise of the internet—initially displaced workers but eventually created new roles. However, the pace of AI adoption may be faster than previous transitions, raising concerns about structural unemployment. Carpenter emphasized that the key variable is the speed of economic adaptation, including reskilling programs and labor market flexibility. While AI holds promise for boosting productivity, the path forward remains uncertain, and policymakers must act to ensure the benefits are widely shared.