Our Head of European Sustainability Research Rachel Fletcher
talks about how AI’s is quickly reshaping employment and
productivity across key industries and regions.
Read more insights from Morgan Stanley.
----- Transcript -----
Rachel Fletcher: Welcome to Thoughts on the
Market. I am Rachel Fletcher, Head of European Sustainability
Research at Morgan Stanley.
Today, how AI is shaking up the global job market.
It's Friday, February 20th at 2pm in London.
You've probably asked yourself when all the excitement around AI
is going to move beyond demos and headlines, and start showing up
in ways that matter to your job, your investments, and even your
day-to-day life. Our latest global AlphaWise AI survey suggests
that the turning point may already be unfolding – especially in
the labor market where AI is beginning to influence hiring,
productivity, and workplace skills.
Our survey covered the U.S., UK, Germany, Japan, and Australia,
across five sectors where we see a significant AI adoption
benefit. Consumer staples, distribution in retail, real estate,
transportation, healthcare, equipment and services, and
autos.
We found that AI contributed to 11 percent of jobs being
eliminated over the past 12 months, with another 12 percent not
backfilled. These job cuts were partially offset by 18 percent
new hires, which results in a net 4 percent global job loss. It's
important to note that the survey focused on companies that had
already been adopting AI for at least a year. In fact, most of
the companies in our survey had been adopting AI for more than
two years. So, this is likely the most significant downside case
in terms of the impact of AI on jobs, but it is still an early
signal of potential job disruption.
In Europe, the picture is nuanced. The UK saw the highest net job
loss at 8 percent. This was primarily driven by a lower level of
new hires in the UK compared to other countries that we surveyed,
as well as a high level of positions not backfilled. This
compares to Germany, which posted a 4 percent net job loss in
line with the all-country average. There could be some other
factors amplifying the impact in the UK. For example, broader
labor market weakness driven by higher labor costs and higher
levels of unemployment amongst younger workers. Ultimately,
disentangling AI from macro forces remains challenging.
Moving to sector impacts in Europe, autos experience the largest
net job loss at 13 percent, and this compares to a 10 percent
global average for the sector. It's possible these numbers
reflect persistent sales weakness, and AI driven cost
cutting.
Transportation was least affected at 3 percent, whilst other
sectors clustered around 6 to 7 percent. If we look at the top
quintile of European companies reducing headcount, they've
outperformed other companies that are more actively hiring. This
suggests that investors are rewarding efficiency. On the
downside, staffing firms face potential growth risks from AI
displacement. On productivity, European firms report 10 to 11
percent gains from AI, close to the 11.5 percent global average,
and the U.S. at 10.8 percent. It's worth noting that whilst
Europe lags the U.S. in exposure to AI enablers, adopters and
adopter enablers make up more than two-thirds of the MSCI Europe
Index. However, European AI adopters have traded at a material
discount versus their equivalent U.S. AI adoption peers. So,
turning AI adoption into real ROI and defending pricing power is
crucial for European companies.
If we shift our focus to the U.S., there's a contrast. Whilst the
global net job change was a 4 percent loss, the U.S. actually saw
a 2 percent net gain, driven by AI related hiring. Our U.S.
strategists have lifted expectations for S&P 500 margin
expansion by 40 basis points in 2026 and 60 basis points in
2027.
In our survey, the most frequently cited goals of AI deployment
in the U.S. are boosting productivity, personalizing customer
interactions, and accelerating data insights. Other common use
cases include search, content generation, dashboards, and virtual
agents.
What's becoming clear is AI is no longer theoretical. Our survey
data suggests that it is reshaping hiring, productivity and
margins. The investor question is not whether AI matters, but who
captures the value.
Thanks for listening. If you enjoy the show, please leave us a
review wherever you listen and share Thoughts on the Market with
a friend or colleague today.
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