Summary of BofA Global Research Insights - May 3, 2026

AI and the Labor Market

This week’s report opens with a discussion on the ongoing debate surrounding artificial intelligence (AI) and its impact on the workforce. The consensus among the BofA Global Research team, led by Candace Browning, is that AI will reshape the nature of work rather than eliminate it. Historical data shows that approximately 60% of jobs today did not exist in 1940, supporting the view that AI represents a significant transformation in the labor market.

Globally, around 840 million jobs are exposed to AI, with 442 million in the Asia-Pacific region alone. Interestingly, aging economies, particularly in Europe, are expected to benefit the most from AI as it compensates for declining workforces. Despite the potential for automation, companies continue to seek human skills, with 72% of job openings requiring management skills and 67% requiring business-process skills. The report emphasizes that the gap between AI's capabilities and its current applications suggests that we are still in the early stages of disruption, highlighting the importance of adaptability, lifelong learning, and effective policy design for workforce outcomes.

Corporate Earnings Overview

The report also provides an overview of the recent earnings season, noting that approximately 75% of companies have reported their earnings, with 74% exceeding earnings per share (EPS) expectations and 78% surpassing sales forecasts. These figures are consistent with the strong performance seen in the second and third quarters of 2025, which were the best since 2021. Notably, the median stock is experiencing an 11% year-over-year earnings growth in the first quarter, marking the highest growth in five years. The report indicates that the guidance ratio is above average, with only four sectors reporting more downward guidance.

Healthcare Sector Insights

Healthcare analyst Kevin Fischbeck has upgraded three Managed Care stocks, predicting that Medicaid margins are set to improve in 2026. The report notes that the current negative margins are a result of the reversal of COVID-era benefits, which saw increased medical enrollment and profitability. As states began to drop individuals from Medicaid and utilization rates increased, Medicaid enrollment fell by 19% from its peak by 2025. However, the report suggests that the worst of the risk pool shift is likely behind us, and margins should improve as rates adjust higher.

Tariff Rate Analysis

Claudio Irigoyen, Head of Global Economics, discusses the decline in the effective tariff rate, which has fallen from a peak of 11.3% in October 2025 to 8.7% in March 2026. The report anticipates that country-sector-specific tariffs will gradually replace blanket tariffs, potentially complicating revenue recovery. The effective tariff rate is projected to stabilize between 6-8% by the end of the year. While the reduction in tariffs may provide a slight tailwind to growth, the report suggests that inflationary pressures will remain largely unchanged in the short term, with core PCE inflation expected to be at 3.1% by the end of 2026.

Conclusion

In summary, the BofA Global Research report highlights significant trends in AI's impact on the labor market, strong corporate earnings, potential improvements in the healthcare sector, and a nuanced view of tariff rates and their implications for inflation and growth. The insights provided are crucial for understanding the evolving economic landscape and making informed investment decisions.