While AI's current impact on jobs is minimal, the *anticipation* of its future capabilities is creating a speculative drag on the labor market. Management teams, aware of hiring and firing costs, are becoming cautious about adding staff whose roles might be automated within 6-12 months.

Despite marketing hype, current AI agents are not fully autonomous and cannot replace an entire human job. They excel at executing a sequence of defined tasks to achieve a specific goal, like research, but lack the complex reasoning for broader job functions. True job replacement is likely still years away.

The narrative of AI destroying jobs misses a key point: AI allows companies to 'hire software for a dollar' for tasks that were never economical to assign to humans. This will unlock new services and expand the economy, creating demand in areas that previously didn't exist.

AI is a key factor in the current labor market stagnation. Companies are reluctant to hire as they assess AI's long-term impact on staffing needs. At the same time, they are holding onto experienced employees who are crucial for implementing and integrating the new AI technologies, thus suppressing layoffs.

Despite rapid software advances like deep learning, the deployment of self-driving cars was a 20-year process because it had to integrate with the mature automotive industry's supply chains, infrastructure, and business models. This serves as a reminder that AI's real-world impact is often constrained by the readiness of the sectors it aims to disrupt.

The main barrier to AI's impact is not its technical flaws but the fact that most organizations don't understand what it can actually do. Advanced features like 'deep research' and reasoning models remain unused by over 95% of professionals, leaving immense potential and competitive advantage untapped.

The slow adoption of AI isn't due to a natural 'diffusion lag' but is evidence that models still lack core competencies for broad economic value. If AI were as capable as skilled humans, it would integrate into businesses almost instantly.

Instead of immediate, widespread job cuts, the initial effect of AI on employment is a reduction in hiring for roles like entry-level software engineers. Companies realize AI tools boost existing staff productivity, thus slowing the need for new hires, which acts as a leading indicator of labor shifts.

The real inflection point for widespread job displacement will be when businesses decide to hire an AI agent over a human for a full-time role. Current job losses are from human efficiency gains, not agent-based replacement, which is a critical distinction for future workforce planning.