Youth unemployment is rising – and artificial intelligence ('AI') is at least partially to blame...
The U.S. youth unemployment rate reached 10.8% this summer. That's the highest level since 2021, when the country was working through pandemic shutdowns.
Across Asia and Africa, youth unemployment rates are even worse. In India and China, they're closer to 17%. In Morocco, the youth unemployment rate is a staggering 36%.
Corporations are leaning on automation instead of training young talent. They frame it as "boosting efficiency," though they're eliminating junior roles that were once essential to their operations.
A company that relies too heavily on AI can appear streamlined on the surface. Fewer salaries to pay means higher profits. But underneath, human judgment is slowly disappearing... and that's where small errors are beginning to stack up.
Today, we'll explain how the removal of junior roles is becoming a dangerous macro trend – for both the corporate world and the investing world.
AI can spot patterns... but junior employees are the ones who notice when those patterns break down.
Traditional AI is good at monitoring large datasets and identifying patterns of behavior.
According to Bloomberg, AI is particularly good at detecting things like fraud, as it's able to spot money moving in circles or jumping through several accounts.
However, when it comes to making judgment calls or when there are irregularities that fall outside the model's experience... that's where AI struggles.
AI models like ChatGPT, for instance, do away with proper risk-management work. They're more likely to produce answers they think you want to hear rather than interrogate outliers.
And yet... more and more companies are leaning on AI to do a lot of the legwork that junior staff used to do.
Fiserv (FISV) is a great example of how important junior positions are...
The company is one of the largest payment processors in the U.S. It had a reputation for steady growth, and analysts saw it as a dependable stock.
That view broke in a single day when Fiserv cut its full-year outlook in October. It lowered its revenue-growth guidance from a range of 10% to 12% down to just 4%. And it cut earnings expectations by nearly 20%.
While the news caught almost all of Wall Street off guard, Dominic Ball, a 26-year-old analyst at Rothschild, saw it coming...
He spent months analyzing the payment industry and Fiserv's platform. And he saw that the business was weakening long before the guidance cut surfaced.
His work was straightforward but time-intensive, and it required judgment rather than AI pattern recognition.
That's exactly the type of analysis companies lose when they eliminate junior roles and lean too heavily on automated systems.
It was a similar story with the Tricolor collapse we covered a few months ago...
If you recall, the used-car company filed for Chapter 11 bankruptcy after allegations of collateral fraud. (It was found to have promised the same vehicles as collateral to multiple lenders.)
JPMorgan Chase (JPM) – one of its lenders – had been using AI to automate the work of junior bankers, so it didn't catch any issues with the collateral. Rather, a young analyst at a small company called Waterfall Asset Management caught the irregularity and notified JPMorgan.
These events show how exposed the system becomes when young talent disappears.
Junior staff provide the vigilance that a computer model and more senior employees often miss.
If AI continues to replace junior workers, expect more surprises like these ones...
AI can streamline operations, but it can't replace human judgment. A corporate landscape that sidelines junior staff loses this critical-thinking step.
While cutting junior employees and investing in AI may help companies get more profitable in the short term, it'll likely expose them to more pain down the line.
And when that happens, we wouldn't want to own companies that have been aggressively replacing headcount with AI... We'd rather own the companies that are utilizing AI tools to enhance their workforce.
Regards,
Joel Litman
December 16, 2025
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