AI in the UK and Negative Growth in GDP

Welcome to the Letter from the Chief Economist.

A few weeks ago, I highlighted how Lightcast data is being used in Europe to understand the developing trend of AI-related jobs. In the fall, we’ll be taking that a step further with our own research report showing the impact AI adoption and diffusion has made on the job market in the UK. 

A few days ago, Lightcast Executive Vice President of Global Business Andy Durman and Vice President of Global Innovation Duncan Brown hosted a webinar going over our findings—be sure to catch up on that discussion.

While there were some new trends in the technical skills being requested (an increase for coding languages including Python and SQL, and a decrease in languages including C++), the more significant finding is in the rising importance of soft skills, including teamwork, creativity, and problem solving. 

This lines up with what I’ve heard in conversations with Lightcast clients: they want data scientists and machine learning engineers that not only have the latest technical skills, but also the ability to be team players, see the bigger picture, and understand the business problems they’re solving for their clients. This finding lines up with this seminal 2015 paper from David Deming, which makes the case that the US labor market continues to reward social skills more and more.

Another thing I really love about this report is being able to collaborate with our longtime partner Infogr8, who’ve created some very cool animations and visuals:

Infogr8 is also one of our partners for Cyberseek.org, which analyzes the demand for cybersecurity professionals and the skills required for those jobs in the US. Their visualizations show the career pathways in the cybersecurity space.

Economic News

The second-quarter GDP report out today was one of the most highly-anticipated economic reports in a long time because of the possibility it might show a second straight quarter of negative growth, a traditional indicator of a recession. And it did: after declining 1.6% in the first quarter of 2022, advance estimates show it declined 0.9% in the second.

However, not everyone agrees with that rule of thumb, where two quarters of decline is automatically a recession. In fact, Federal Reserve Chairman Jerome Powell explicitly said yesterday that "The labor market is just sending such a strong signal of economic strength that it makes you really question the GDP data."

Powell’s statement came after the Federal Reserve announced it would raise interest rates by 75 basis points (0.75%) in its ongoing fight against inflation. Last Thursday, the European Central Bank raised its rates by 0.5%—its first rate rise since 2011. 

So despite the drop in GDP, it’s still true that the labor market is very tight. If this is a recession, it’s not like one we’ve ever seen before. 

In The Papers

Going back to the topic of AI adoption and diffusion, the paper I want to highlight this week is called “Firm Investments in Artificial Intelligence Technologies and Changes in Workforce Composition” and is co-authored by Tania Babina,  Anastassia Fedyk, Alex Xi He and James Hodson. Using Lightcast job postings data and profile data from Cognism, the paper examines shifts in US firms’ workforce composition and organization with regard to AI.

They found that companies that initially have more highly-educated workers tend to invest more in AI, and as firms invest more in AI, their workforces tend to be made up of more highly-educated workers. One of the most interesting findings is that AI investments are associated with a flatter hierarchical structure within the business. In other words, the share of junior-level workers increases while the share of workers in middle-management or senior roles decreases.

This matters because these insights help us understand how AI transforms the organization and production processes at the firms adopting it. As a predictive technology, AI improves individual employees’ decision-making ability, increasing workers’ autonomy and reducing the need for management overseeing them. At the same time, AI does not seem to reduce the demand for highly-educated and skilled workers. 

As time goes on and more and more companies and industries continue to adopt AI, these patterns will play out in bigger and bigger ways throughout the labor market—and we’ll be watching to see that play out in the data. 

Until next week, 

Bledi Taska

Lightcast Chief Economist