Analysis of past technological shifts, like the decline in agricultural labor and the invention of spreadsheets, shows that disruption typically creates new job categories and diversifies the labor market. Productivity gains lead to entirely new services and roles, rather than simply causing mass unemployment.

In the short term, a large wave of automation could lead to a recession. If many people lose their jobs simultaneously, their spending will decrease significantly. This creates a shortfall in aggregate demand, causing the economy to slump before the long-term productivity benefits of AI can be realized.

The impact of AI-driven job displacement is magnified by the current economic downturn. In a boom, laid-off workers might start successful companies. In a recession, these new ventures are more likely to fail, eliminating the typical entrepreneurial safety net and accelerating economic strain.

Major tech shifts don't immediately destroy jobs. First, they create a "recruiting cycle" with high demand for labor to build the new infrastructure (e.g., car factories). These new, higher-paying jobs attract workers from old industries before those legacy sectors eventually decline.

Pessimism about AI-driven job losses overlooks historical precedent. The transition from an agricultural to an industrial economy caused massive job displacement but ultimately created far more new jobs. Similarly, AI will likely generate new, currently unimaginable roles and industries.

History shows businesses often invest in new technology during downturns. A future recession could trigger a wave of AI implementation as firms restructure to cut costs, potentially accelerating automation and prolonging the negative employment shock more than in past cycles.

The panic-inducing Citrini paper, which caused a market sell-off, assumes a static economy where AI only destroys jobs. It completely ignores historical precedents where new efficiencies unlock unforeseen demand and create entirely new industries, a concept similar to the Jevons paradox.

In a strong economy, AI would spur a wave of successful new companies, creating new jobs. However, because this technological shift is happening during an economic downturn, most new AI-enabled startups will likely fail, leading to net job destruction rather than creation.

Historically, economic downturns accelerate technological displacement. During a recession, companies lay off workers and then use the subsequent recovery to evaluate how many roles can be permanently replaced by new technology like AI. The next recession could therefore trigger a significant wave of structural unemployment.