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TD Securities: AI Impact on US Labor Market Stays Limited
TD Securities says AI-driven job displacement is not showing up in US data, keeping wage growth sticky and the Fed cautious. That supports the dollar against the euro and sterling.
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TD Securities pushed back against narratives of an imminent AI-driven workforce shakeup, calling the impact on the US labor market limited so far. For currency traders, that removes one of the easy disinflation catalysts the market had penciled in for 2025. The bank’s assessment signals that large-scale job displacement from artificial intelligence is not showing up in the data. Core inflation dynamics remain more persistent than a dovish baseline would require.
The view matters because a tight labor market and sticky wage growth force the Federal Reserve to stay cautious. Rate cuts priced into futures have already been trimmed in recent weeks. TD Securities’ read reinforces that trend. The limited AI effect means businesses are absorbing new technology without shedding headcount at the macro level. Productivity gains may arrive later. For now, the payrolls picture reflects broad labor demand. That keeps upward pressure on wages relative to the pre-pandemic trend, which in turn supports a higher-for-longer interest rate stance from the Fed.
TD Securities’ Labor Market Call and the Fed’s Reaction Function
The central bank has highlighted labor market tightness as a key variable in its reaction function. If AI were already hollowing out white-collar employment, the disinflationary impulse would give the Fed room to cut earlier. TD Securities does not see that happening. The bank’s read leaves sequential nonfarm payrolls prints, average hourly earnings, and JOLTS openings as the dominant swing factors. Until those data points show measurable cracks, the rate-cut timeline remains pushed back.