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 economists, including Benson Wu and the Global Economics Team, is that AI will reshape the labor market rather than eliminate jobs. Historical data shows that approximately 60% of jobs today did not exist in 1940, highlighting the transformative nature of technological advancements.

Currently, around 840 million jobs globally are exposed to AI, with 442 million in the Asia-Pacific region. Interestingly, aging economies, particularly in Europe, are expected to benefit the most from AI as it compensates for declining workforces. Despite the high exposure to AI, 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 potential and its current application suggests that we are still in the early stages of disruption, making adaptability and lifelong learning crucial for workforce success.

Corporate Earnings Overview

The report 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 also highlights that capital expenditures from hyperscalers have exceeded consensus expectations, with projected growth of 67%.

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 in 2023, enrollment decreased 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 begin to recover as rates adjust higher.

Tariff Rates and Economic Outlook

Claudio Irigoyen, Head of Global Economics, discusses the recent decline in the effective tariff rate, which has fallen from a peak of 11.3% in October 2025 to 8.7% in March 2026. This decline is attributed to the IEEPA ruling and is expected to continue. The report anticipates that country-sector-specific tariffs will become more prevalent, potentially complicating revenue recovery. Despite the reduction in tariffs, the report suggests that inflationary pressures will remain, with core PCE inflation projected at 3.1% by the end of 2026. The fiscal deficit is also expected to exceed 6% of GDP amid lower tariffs and tariff refunds.

Conclusion

The insights provided in this report highlight the evolving landscape of the labor market due to AI, the strong performance of corporate earnings, particularly in the healthcare sector, and the implications of changing tariff rates on the economy. The overall outlook suggests a cautious optimism as companies adapt to these changes.