AI Job Loss Concerns Grow

For the week ending 27 February 2026

As of midday Friday, global equities were modestly lower, though smaller-cap, value and non-US equities continued to outperform. The yield on the US 10-year Treasury note fell 13 basis points from a week ago to 3.97% amid fears of a US military attack on Iran, concerns over economic disruption from AI, and downward pressure on stocks late in the week. The price of a barrel of West Texas Intermediate crude oil rose $0.80 from a week ago to $67.40. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), was steady at 21.

MACRO NEWS

AI under laser focus

A much-talked about research report that paints a bleak picture of an AI-driven future caught the market’s attention on Monday and kept AI in focus for the rest of the week. The report imagines a 2028 in which rapid advances in AI have turbocharged productivity but also rendered large swaths of human labor obsolete, leading to job losses and collapsed consumer spending and dragging down major stock indices. This was followed by Thursday’s news that payments firm Block is laying off 40% of its staff and replacing them with AI agents — an announcement that was seen by some as a harbinger.

Though AI is disrupting a number of industries, not just the tech sector, fears that it will not deliver adequate returns to justify the colossal levels of investment remain top of mind; even exceptionally strong earnings from Nvidia were unable to soothe the market’s nerves. Indeed, skeptics found aspects of the Nvidia earnings report worrisome, especially their $95 billion in purchase commitments, which could saddle them with unwanted inventory in the event of a downturn. Some see the company as positioned similarly to Cisco Systems when the dot-com bubble burst. Markets were also unsettled by reports this week that Chinese AI model developers have been accused of large-scale distillation attacks, which systematically probe proprietary AI models to steal data for training cheaper competitors.

The state of our union is long…

US President Donald Trump’s State of the Union address on Tuesday, at 1 hour and 48 minutes, was the longest on record. It was also long on accomplishments and short on policy proposals. Regarding trade, Trump said he doesn’t need to seek congressional approval for additional tariffs and will instead work within the authorities Congress has already delegated to the president. He also called on lawmakers to enact restrictions on institutional investor ownership of single-family rentals and proposed allowing workers without access to 401(k) accounts to invest in new accounts that are similar to the Thrift Savings Plan for federal workers. That plan would include a $1,000 government match. He also announced the Ratepayer Protection Plan, under which large US tech firms have pledged to “build, bring, or buy” their own electrical supplies for new data centers to avoid driving up consumer electricity prices.

Iran, US say talks made progress

Negotiators from Iran and the US met on Thursday in Geneva, and while no agreement between the two countries was reached, both sides have said that progress was made. However, Iran appears to have rejected the US demands that its uranium stockpiles be moved out of Iran, enrichment be abandoned, and its nuclear facilities be dismantled. Iran reportedly proposed instead that its uranium stockpile be reduced to low levels of enrichment under the supervision of the International Atomic Energy Agency. Additional discussions are anticipated next week, but the absence of any formal agreement keeps open the possibility of US military action. News on Friday that the US is evacuating non-essential staff from its embassies in Israel and Lebanon fanned fears of a strike against Iran, sending oil prices to higher

QUICK HITS

US Trade Representative Jamieson Greer said Wednesday that a new US global tariff will rise to 15 percent or higher for some countries, an increase from the 10 percent imposed last week via executive order, as the Trump administration takes steps to replace the tariffs struck down by the US Supreme Court.

According to Freddie Mac, the average rate on a 30-year mortgage rate in the US has fallen below 6% for the first time since 2022.

Moody’s warned this week that big tech companies are masking billions of dollars of potential liabilities by using special-purpose vehicles funded by others to build data centers. The long-term cost of leasing data centers back from these entities is equivalent to debt in the eyes of rating agencies and many investors, the report said.

The US producer price index rose 2.9% year-over-year in January. This was down from 3% in December but above the forecasted 2.6%.

In a speech this week, US Treasury Secretary Scott Bessent emphasized that the Trump administration’s push to include private assets in 401(k) plans is intended to democratize returns, not to turn retirement accounts into a “dumping ground” for low-quality or illiquid assets.

The European Parliament this week postponed a vote on ratifying the US–EU trade deal after the Supreme Court overturned President Trump’s use of IEEPA as the basis for levying tariffs against the EU and others. EU lawmakers will reconvene on March 4 to assess whether the US has clarified the situation and confirmed its commitment to last year's deal.

The Wall Street Journal reported Thursday that the US Federal Reserve is challenging subpoenas issued as part of the US Attorney’s probe into cost overruns on the renovation of the central bank’s headquarters. The Fed, in sealed proceedings, has asked a judge to quash the subpoenas, which could reduce or eliminate its obligation to respond, the paper reported.

An expectations index from Germany’s Ifo Institute increased to 90.5 from a revised 89.6 in January, beating the median estimate of 90 from a Bloomberg survey. 

Former British Ambassador to the US Peter Mandelson was arrested this week on suspicion of misconduct related to the unauthorized sharing of government documents with disgraced financier Jeffrey Epstein.

During a visit to Beijing this week, German Chancellor Friedrich Merz called on China to reduce subsidies for its domestic manufacturers to allow the value of its currency to strengthen and to ensure continued exports of critical minerals.

Fitch Ratings, in a new report this week, said that “domestic financial imbalances in the Chinese economy have risen to historic highs, due to continued high household savings, weak consumption and the recent contraction in capital spending...This leaves economic growth increasingly reliant on external demand and support from fiscal policy through sustained high public deficits.”

The Conference Board’s US Consumer Confidence index rose to 91.2 in February from an upwardly-revised 89.0 in January. The labor differential — the difference between the percent of respondents saying jobs are plentiful and those saying jobs are hard to get — also increased.

Japanese Prime Minister Sanae Takaichi nominated two reflationist academics, Ayano Sato and Toichiro Asada, to join the Bank of Japan’s board. The nominations are likely to fuel speculation that Takaichi will discourage the central bank from raising interest rates quickly in order to prioritize economic growth.

According to the Institute of International Finance, global debt surged by almost $29 trillion to a record $348 trillion last year— the biggest annual increase in the global debt burden since the COVID-19 pandemic. Governments’ investments in national security were the primary driver behind the rise, with spending on AI also contributing.

The US Treasury Department said it would approve, on humanitarian grounds, the sale of Venezuelan oil to Cuba’s private sector, but not to the Cuban government.

Pakistan’s foreign minister says his country is in “open war” with Afghanistan amid cross-border airstrikes and ground clashes. Pakistan has accused the Afghan Taliban of harboring militants who have launched attacks against Pakistan.

Canadian GDP came in lower than expected on Q4, falling 0.6% on an annualized basis. Much of the weakness was tied to a rise in inventories. The data are seen as having little impact on the outlook for monetary policy, with the Bank of Canada expected to remain on hold.

EARNINGS NEWS

With about 96% of the constituents of the S&P 500 Index having reported, blended earnings per share (which combines reported data with estimates for those that have yet to report) rose 14.2% compared with the same quarter last year, according to data from FactSet. Blended sales have risen 9.4% year-over-year.

THE WEEK AHEAD

Monday: Global manufacturing PMIs

Tuesday: Eurozone CPI

Wednesday: Global service sector PMIs; eurozone unemployment

Thursday: Eurozone retail sales; US productivity

Friday: Eurozone GDP; US employment report, retail sales

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Past performance is no guarantee of future results.

Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.