This week in charts
S&P 500 Index price-to-earnings valuations
Weight of the largest stock in S&P 500 Index since 1981
S&P 500 Index revenue per employee, by sector – 1991 vs. 2025
U.S. equity market – YTD returns, by sector
Capex growth – tech vs. sectors
Magnificent Six costs – asset intensity vs. innovation
Technology, media and telecommunication sectors becoming more asset intensive
Capex growers relative performance
U.S. corporate buybacks
Investment-grade and high-yield bond fund flows
Youth Is Losing to Experience in This Job Market
There are plenty of signs that AI is making the job market tougher for young college graduates, but for the 22 million people with jobs that are categorized as professional and business services, wage growth has actually accelerated over the past year to levels solidly above pre-pandemic rates. This suggests that the state of the labor market for white-collar workers is best described as bifurcated — one where there are both winners and losers rather than one where most workers are worse off.
Despite the overall unemployment rate being a solid 4.2%, conditions for young workers are soft. Only 65.3% of 20- to 24-year-olds were employed last month, nearly three percentage points lower than the post-pandemic peak in January 2024, and roughly the same proportion as we saw in December 2008 following Lehman Brothers Holdings Inc.’s collapse. For the millions of college graduates in the 22 to 29 age group, the unemployment rate stood at 3.7% in the first six months of the year, compared with 2.8% in 2019, according to Current Population Survey data.
Such numbers are backed up by numerous news reports as well as comments from corporate executives on how they see AI transforming labor needs. Internship postings this spring were down. A recent Wall Street Journal report noted that the share of entry-level hires relative to all new hires has slumped by 50% since 2019 among the biggest technology companies, while another pointed to consultancy firm McKinsey putting together smaller but more experienced teams as it adds AI to the mix.
It’s also becoming more common for CEOs to talk about AI eventually leading to significant layoffs. At Meta Platforms Inc., Alphabet Inc. and Microsoft Corp., employee headcount grew 64% between 2019 and 2022 but just 3% over the past three years. This comes at a time when the three tech juggernauts collectively plan more than $250 billion in capital expenditures over the next 12 months, suggesting that there’s a tradeoff between investing in AI and hiring workers.
While the number of jobs in the professional and business services’ category of the non-farm payrolls data shrank slightly over the past year, wage growth accelerated to just above 5% in July. Compare that with 2019, when employment growth averaged 1.3% while wages rose 3.7%.
One explanation for this is that there are composition effects at work. If companies aren’t hiring young workers, who tend to be lower paid, we’re going to get lower employment growth in professional and business services along with increasing average compensation levels, which could overstate the extent to which older, more experienced workers are getting raises.
But there are reasons to believe some workers really are gaining from this phase of the AI boom. There’s the pro athlete-type offers being made to the select few engineers building new AI models. Outside the tech sector, there’s the experience of companies such as McKinsey, where “mediocre expertise” is going away while specialized expertise becomes more valuable in combination with AI agents. That dovetails with Nvidia Corp. CEO Jensen Huang’s prediction that workers who use AI will be fine in this transition.
It’s reasonable for all workers to be uncomfortable with a technological innovation that hasn’t disrupted most workers yet but where the ultimate outcome is so uncertain. There’s no guarantee that the next generation of AI models won’t come after workers with more advanced skills. It’s also a far cry from the technology boom of the late 1990s, which was accompanied by broad-based employment, compensation and consumption growth.
This week’s fun find
Photos of surfing dogs hanging ten in annual competition
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The annual World Dog Surfing Championships took place near San Francisco on Saturday. Thousands of spectators flocked to Pacifica State Beach to watch pooches ride the waves solo, in pairs or with human companions. The dogs were judged on balance, time on the board and any tricks they performed.
