AI is impacting some sectors while wage pressures exist where consumers are most hit.
Labor Leverage Ratio
The Labor Leverage Ratio (LLR) is the number of quits divided by the number of discharges, firings, and layoffs initiated by employers.
The series comes from the BLS Job Openings and Labor Turnover Summary. Unlike openings, quits and layoffs are relatively hard data.
The BLS comments “the quits rate can serve as a measure of workers’ willingness or ability to leave jobs.”
The Labor Leverage Ratio is a refinement to the quits rate.
Labor Leverage Ratios by BLS Category
- Nonfarm: 1.76
- Private: 1.72
- Leisure and Hospitality: 2.25
- Construction: 1.57
- Durable Goods: 1.71
- Manufacturing: 1.69
- Accommodation and Food Service: 2.93
- Retail Trade: 4.55
- Education and Health Services: 2.85
- Professional and Business Services: 0.98
No sector is harder hit than Professional and Business Services. This is the sector AI is hitting the hardest.
The higher the number, the easier it is for workers to quit and find another job, and the harder it is for employers to retain employees.
According to the U.S. Bureau of Labor Statistics (BLS), Leisure and Hospitality is a broad “supersector”. Accommodation and Food Services is a narrower sector that lives inside it.
Rising Wage Pressures
- Leisure and Hospitality
- Accommodation and Food Services
- Retail Trade
- Education and Health Services
Those industries will either raise prices, lose profit margins, lose employees, or some combination of those.
Losing employees is not a great option, so, most businesses will raise prices or suffer from shrinking profit margins.
Raising prices has it own set of issues, mainly falling consumer demand.
Labor Leverage Ratios Select Services and Months
Labor Leverage Ratios generally peaked in May of 2022.
Labor Leverage Ratio – Detail Four Industries
The above chart puts a key spotlight on the jobs AI is killing.
If you lose your job in this sector, your next one may be Leisure and Hospitality.
Meanwhile, there is upward pressure on the price of food, especially eating out, as restaurants need to raise prices to keep up with higher staffing costs.
The same applies to hotels. And airlines are raising prices to accommodate rising jet fuel prices.
All of this is tempered by falling demand and cutting corners by consumers who are cash strapped.
AI Decimates Careers that Were Once a Sure Path to Middle Class
On May 27, 2026, I noted AI Decimates Careers that Were Once a Sure Path to Middle Class
Say goodbye to most customer service jobs.
The labor turnover data confirms the story. Click for more details.
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fast food is taking a big hit in CA. Can’t serve crap food, raise prices 50% in 4 years and expect people to keep showing up.
The hospitality / food sector has had high turnover historically. When a business slows, it cuts hours first. Enough employees respond by looking elsewhere that no layoffs have to take place. The exception is when taxes and stock market sell offs force restaurants to close suddenly.
KUDLOW: How bad is the inflation right?
HASSETT: Right now it’s on a deep, downward dive. And the inflation is really out of control in the blue states. So if you take out New York and California, then the story is radically different. And so there’s really good news even on inflation right now.
Which state is #1 in inflation?
AI Overview
Florida currently holds the number one spot for the highest state-level inflation in the country, tracking an inflation rate of roughly 4%.
USA Today
Because the Bureau of Labor Statistics (BLS) primarily measures inflation at the regional and metropolitan levels, exact state rankings can fluctuate depending on the economic analysis:
USA Today
Florida: Leads many state-specific analyses due to continuous population surges and the subsequent strain on the housing and insurance markets.
USA Today
+1
Virginia: Follows closely behind (hovering around 3.8%), driven by a booming tech hub and increased demand for workers.
USA Today
Inflation is going to be highest in the states with the best economies. I’d expect it to be the biggest states with various tech and financial firms. Those are mostly blue, but Texas and Florida fit in too. The lowest inflation states are going to be the poorest and very red: Alabama, Mississippi, Arkansas, …
Florida has the largest number of social security socialist geezers. They get free money handouts and spend it on the open market while contributing nothing.
Florida has also been the state with the harshest anti-immigrant policies so I guess immigrants weren’t driving up inflation after all.
BB says differently…
The number of open jobs in the U.S. economy jumped to 7.6 million in April while layoffs declined, evidence of how demand for workers has intensified.
At the end of April, there were just over 7.6 million open positions, up from about 6.9 million at the end of March, according to the Labor Department’s monthly report on job openings and labor turnover. This is the largest number of job vacancies in two years.
The manufacturing sector saw openings rise to 474,000, up 24,000 from the previous month and 98,000 higher than a year ago. The monthly increase was entirely in durable goods businesses, as nondurable goods openings remained flat.
Openings in the economically sensitive professional and business services sector rose from 1.047 million to 1.715 million. Openings were down in retail trade and the hospitality and leisure sectors.
The federal government saw job vacancies climb from 78,000 to 95,000. State and local government vacancies rose from 652,000 to 682,000. Openings in healthcare and social assistance climbed from 1.378 million to 1.467.
The quits rate ticked down from 2.2 percent to 2.1 percent, indicating fewer workers voluntarily left their positions in May. A rising quits rate is associated with worker confidence. The rate was flat or declined slightly for most sectors in April.
Enhance or Eliminate? How AI Will Likely Change These Jobs
https://www.library.hbs.edu/working-knowledge/enhance-or-eliminate-how-ai-will-likely-change-these-jobs
Good article. The interactive charts are very interesting. I’m glad I am retired. I do worry about the job market for younger people going forward. The job market is changing rapidly.
Looks like “Dancers” will be relatively unaffected.
Well, they have been using CHATBOTS for Customer Service forever and those encounters make me scream into my Phone: “AGENT PLEASE!” It no longer works.
The least they could do is have the AL sound like Scarlett Johansson.
Try yelling “Fryyyyiiing Tonight!!!!”
Well that’s what anti-immigrant policies will do for you. Throw 10,000 boomers retiring and going on state welfare for money and health and it’s going to be an epic disaster.
And AI may be great for eliminating white collar jobs, it will drive up electric, water, natural gas, and land use for everyone else.
That assumes they get built though: https://www.youtube.com/watch?v=9WcAKWbs_jw
Do worry, Trump & Walrus will find a way to make things even worse.™
There already aren’t enough kids to support social security… and hospitality jobs ain’t gonna bring in enough even if there were more kids.
This is not just a problem for the young.
Yeah it’s a problem for everyone. Does “got exit strategy?” make sense yet or do you need to see more demographic death spiral, dysfunction and collapse before you take heed?
How ignorant to characterize SSI and Medicare as welfare. People have no choice but to pay into the system if they want to work, in my case over 50 years. These are earned benefits with dedicated funding streams, not welfare.
If you wish to conflate entitlements with general revenues than you have to consider the the US taxation system is grossly regressive, as earnings are taxed from the first dollar of wages for SSI and not paid on income over $180,000, nor on capital gains or dividends.
Welfare indeed.