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Welcome to Thoughts on the Market. I'm Rachel Fletcher, head of European Sustainability Research at Morgan Stanley. Today, how AI is shaking up the global job Market It's Friday, February 20th at 2pm in London. You've probably asked yourself when all the excitement around AI is going to move beyond demos and headlines and start showing up in ways that matter to your job, your investments and even your day to day life. Our latest global AlphaWise AI survey suggests that the turning point may already be unfolding, especially in the labor market where AI is beginning to influence hiring, productivity and workplace skills. Our survey covered the us, uk, Germany, Japan and Australia across five sectors where we see a significant AI adoption benefit consumer staples, distribution and retail, real estate, transportation, healthcare equipment and services and autos. We found that AI contributed to 11% of jobs being eliminated over the past 12 months, with another 12% not backfilled. These job cuts were partially offset by 18% new hires, which results in a net 4.4percent global job loss. It's important to note that the survey focused on companies that had already been adopting AI for at least a year. In fact, most of the companies in our survey had been adopting AI for more than two years, so this is likely the most significant downside case in terms of the impact of AI on jobs. But it is still an early signal of potential job disruption. In Europe, the picture is nuanced. The UK saw the highest net job loss at 8%. This was primarily driven by a lower level of new hires in the UK compared to other countries that we surveyed, as well as a high level of positions not backfilled. This compares to Germany which posted a 4% net job loss in line with the all country average. There could be some other factors amplifying the impact in the uk, for example broader labour market weakness driven by higher labour costs and higher levels of unemployment amongst younger workers. Ultimately, disentangling AI from macro forces remains challenging. If we look at the top quintile of European companies reducing headcount, they've outperformed other companies that are more actively hiring. The this suggests that investors are rewarding efficiency. On the downside, staffing firms face potential growth risks from AI displacement on productivity. European firms report 10 to 11% gains from AI, close to the 11.5% global average and the US at 10.8%. It's worth noting that whilst Europe lags the US in exposure to AI enablers, adopters and adopter enablers make up more than 2/3 of the MSCI Europe index. However, European AI adopters have traded at a material discount versus their equivalent US AI adoption peers. So turning AI adoption into real ROI and defending pricing power is crucial for European companies. If we shift our focus to the us, there's a contrast. Whilst the global net job change was a 4% loss, the US actually saw a 2% net gain driven by AI related hiring. Our US strategists have lifted expectations for S&P 500 margin expansion by 40 basis points in 2026 and 60 basis points in 2027 in our survey. The most frequently cited goals of AI deployment in the US are boosting productivity, personalizing customer interactions and accelerating data insights. Other common use cases include search content generation, dashboards and virtual agents. Thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share thoughts on the market with a friend or colleague today.