"It's All Over": Analysts Describe How AI Threatens Prestigious Professions and the Housing Market

The development of artificial intelligence means that “a complete restructuring of the economy is virtually inevitable,” according to a report by the independent rating agency Egan-Jones. Its analysts are known for issuing early warnings about difficulties at large companies. In particular, the agency downgraded Enron and WorldCom even before the extent of their problems became apparent to the market, and in 2008, it highlighted the credit risks at Bear Stearns and Lehman Brothers well in advance.

Now, Egan-Jones has published an essay titled “It’s All Over, ” in which it argues that companies that sell expertise on an hourly basis will be “first in line” for job cuts due to the advancement of AI. Moreover, not even the most highly qualified specialists will be immune to this.

“The capabilities of the latest models appear to have surpassed the threshold for quality of results and processing speed required for their widespread adoption,” according to a study by Egan-Jones, an independent rating agency and corporate voting consultant. This means that a “decline in profitability in the professional services sector” is to be expected, the analysts write.

In their view, some companies will be able to operate more efficiently with fewer employees—or even without any—and will have no trouble transitioning to round-the-clock operations.

This bleak outlook echoes the findings of a high-profile report by Citrini Research, which sent shockwaves through the market in February with its “AI apocalypse” scenario. In particular, investor fears led to a sell-off of software developers’ stocks: their combined market capitalization fell by $200 billion, MarketWatch notes. Citrini predicted that these companies would be the first to suffer, followed by massive layoffs of office workers.

Egan-Jones also does not paint a rosy picture for companies operating under the “software as a service” (SaaS) model. The firm notes that the interfaces through which users interact with computers will be replaced by simple communication with AI platforms.

Egan-Jones warned that companies selling “intellectual capital by the hour”—including those providing auditing, investment banking, consulting, legal, and engineering services, will face falling prices due to competition from AI. This will lead to job losses: even now, a small team using AI can achieve the same productivity as a larger company and then scale up its business without having to hire more staff. Egan-Jones sees a particularly high risk for senior professionals, as their expert knowledge can now be obtained from AI.

The agency also highlighted how quickly startups can scale with the help of AI. This, in turn, means they will be less dependent on advertising. Furthermore, this will lead to changes in the venture capital market, notes Egan-Jones: venture capital funds will ultimately lose some of their influence and face lower returns.

Staff cuts could have particularly serious consequences for the housing market: real estate price growth has already slowed this year. The firm explains that many mortgage loans are paid off using two incomes per household, and housing has become more expensive relative to wages—especially for buyers whose financial means are already stretched to the limit.

“In our view, prices will come under pressure in the short term due to the limited financial reserves available to some households,” the report states. Egan-Jones emphasizes that about 60% of owner-occupied homes in the U.S. are mortgaged.

In the longer term, the arguments in favor of owning real estate in cities will remain compelling, in part because of people's desire to live near others, analysts noted.

Other major market players have also expressed similar concerns. In late September, Bridgewater Associates, one of the world’s largest hedge funds, warned that AI could displace 18% of the U.S. workforce.

The McKinsey Global Institute has outlined a more moderate scenario: over the next decade, about 11 million Americans may be forced to change careers, but at the same time, nearly four times as many new jobs could be created in the economy. Therefore, according to McKinsey’s estimates, by 2035, AI will significantly change the structure of employment but will not lead to a reduction in the workforce.

So far, AI has not necessarily led to a decline in demand for professional services. On October 1, Accenture, the world’s largest consulting firm, reported that the technology is helping it increase revenue per employee, and that sales could accelerate in the new fiscal year. CEO Julie Sweet stated that clients are just beginning to implement AI and continue to turn to Accenture for help in modernizing their digital infrastructure. The company, however, expects overall headcount growth to slow.

This article was AI-translated and verified by a human editor