Good morning, investors. This Wednesday marks the start of the Santa Rally, though stocks have seen mixed results so far in December.

The shortened Christmas trading week will tell the story.

In today’s edition we’re turning our attention to the next generation of the workforce.

Artificial intelligence isn’t driving mass layoffs but it is still driving radical shifts in the labor market.

While companies like Amazon and Walmart have blamed job cuts on AI this year, the data instead suggest a quiet, more pointed hiring freeze particularly at the entry level. 

Rather than framing this as robots taking human jobs, the reality more closely resembles a hesitance from businesses to create new jobs in the first place.

“The rise in youth unemployment might actually be a symptom of the rise in AI,” Stephanie Roth, chief economist at Wolfe Research, told me on Full Signal.

“It’s not even that AI is doing the job for these people, but companies have uncertainty about the direction of travel and they want to preserve optionality [by not hiring young people].”

While broader layoff headlines in recent months have largely been business as usual to Roth, she does see the basic economics of hiring beginning to shift.

AI has raised the bar for investing in and training junior employees, and new hires now carry more perceived risk than reward.

Indeed, youth unemployment rates have climbed faster compared to older demographics since 2021, data from the Bureau of Labor Statistics show. 

The jobless rate for Americans ages 16-25 hovered at 10.6% in September.

It’s true that young people typically face higher unemployment compared to people who are mid-career, but the gap has nonetheless widened between old and young. 

New tools like OpenAI’s ChatGPT or Google’s Gemini are now on par with a “knowledgeable but not fully reliable assistant,” according to Steve Hou, a quant researcher at Bloomberg. 

That’s created a new floor for productivity, which in turn makes marginal hires look costly and slow.

On Full Signal, Hou told me that the dynamic is exacerbating the K-shaped divide in the workforce by rewarding those who can leverage new technology with greater opportunities and compensation.

To Hou, the “K” in the K-shaped economy stands for knowledge. 

“It’s not true that we are paying labor less, we’re just paying the smartest people a heck of a lot more,” Hou said.

“You’re going to have an ever-more smaller section of the smartest individuals who can make creative use of AI.”

To be clear, there is reason for optimism.

Innovation — while sometimes painful in the near-term — has a tendency toward creative destruction over a longer timespan.

Roth noted that 60% of working people today are employed in occupations that did not exist in 1940. 

History suggests it’s not a contrarian bet to expect AI to drive a similar and productive restructuring in the labor market.

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📈Gold and silver are at record highs. The two metals climbed early Monday as investors piled back into the safe-haven assets. Both have notched banner years. (CNBC)

📨 Tariff dividends could be coming, says Kevin Hassett.The National Economic Council director said Sunday that the White House expects the Supreme Court to rule in its favor, and that would open the door to the $2,000 rebate checks for Americans. (Yahoo Finance)

📈 Oil prices are moving higher. Brent crude hit $61 a barrel after President Trump ramped up a blockade on Venezuela, with US forces boarding one tanker and pursuing another within weeks of first capturing a vessel. (Bloomberg)

🗓 December 22, 2017: President Trump signed the Tax Cuts and Jobs Act, the largest US tax overhaul since the 1970s. It cut the corporate tax rate from 35% to 21%.

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📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter and host our show, Full Signal, to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at [email protected].

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