The threat of job losses could cause more hesitation in potential buyers
It’s no surprise to anyone who has followed the stories about the growth of artificial intelligence that there would be unwelcome side effects to new technologies.
One of the major side effects discussed is the loss of jobs due to AI technology. Companies are starting to announce these layoffs, and it’s causing concerns in the job market.
While they haven’t made a large dent in the major job reports, economists are watching closely to see if the trend of AI layoffs starts to cause an increase in overall unemployment numbers.
One mortgage broker said it’s a trend that brokers need to keep a close eye on, in large part because the people most affected by AI layoffs are also people likely to be in the housing market.
Amir Nurani (pictured top), broker-owner at Left Coast Leaders, said he’s concerned about a growing trend in the tech sector of white-collar job layoffs. It’s especially concerning that several companies have seen major stock increases after these AI-caused layoffs.
“AI is creating job displacement, whether you like it or not,” Nurani told Mortgage Professional America. “You're seeing it in companies that are doing layoffs. Salesforce did layoffs due to AI. Meta did layoffs due to AI. You just saw Block reduce its company size by 50%. What happened to Block stock when they cut by 50%? It shot up 24%.
“All investors are looking at that, going, ‘Profit margins are going to increase.’ That is going to perpetuate layoffs throughout the market. Because now every company is going to emulate that exact same playbook.”
A waterfall of layoffs
Nurani understands how things work with publicly traded companies. It all comes down to the bottom line and what makes shareholders happy.
“They're going to know that if they can cut headcount due to AI and increase profit, stocks are going to go up,” Nurani said. “Publicly traded companies have fiduciary duties to the stockholders, because they need to maintain, protect, and increase profit. I think that you're going to see a waterfall of layoffs happen throughout the rest of this quarter and into the next quarter.”
The combination of the fact that these are higher-paying jobs being eliminated, with a potential negative impact on the job market as a whole, could lead the Federal Reserve to ease rates.
“It's going to have adverse impacts on unemployment,” Nurani said. “That will give some credence to using monetary policy at the Fed. More importantly, those jobs that are being eliminated from the market are white-collar jobs. These are not $35,000 a year jobs. These are significantly higher wages that are being eliminated from the economy, which inherently is going to hurt tax revenue, which inherently is going to have an impact on our employment market.”
During the COVID-19 pandemic, there was an increase in unemployment, but many of the jobs were going to return once things returned to normal. Nurani said it’s a totally different situation with AI-related job losses.
“There's no exit ramp,” he said. “When you saw jobs disappear during COVID, we knew that those jobs were coming back to the market. Everybody knew that. Eventually, we will return to a normal world, and those jobs will return. This is different. These jobs are not coming back to the market. Every company is saying, ‘I can solve this problem with AI as opposed to human capital.’”
“AI doesn't call out sick, doesn't have employee issues, and actually, it's flawless in its execution, once you get it dialed in. And so across the board, you're going to see this continue to rip through the market.”
Hesitation in the housing market
Because the jobs lost to AI technology are higher-paying, Nurani is worried that it could have an adverse effect on the housing market. It’s not just the people who have been laid off, but others who feel their jobs are at risk, who could decide to stay put.
“I think that we're going to have labor issues, which I think is going to create a scare on the buyer side,” Nurani said. “It is one of the reasons why I'm saying I think we're going to see a slower spring and summer.”
Even if the impacts aren’t immediate, Nurani thinks that if these layoffs become more prevalent, more buyers could start wondering if it’s the right time to buy a new home. Even if rates come down and prices moderate, those white-collar employees may remain on the sidelines.
“I think that as you get into Q2, a lot of people who are in white-collar jobs, who are the ones that are qualifying for home purchases, are going to be scratching their heads,” he said. “They’re going to say, ‘Is my job safe?’ I think that is enough for people to go, ‘Let me see what happens.’ And when people think that way, they tend to hit the pause button.”
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