Instead of a universal productivity boom, AI will eliminate repetitive white-collar jobs. This will shrink the consumer base, reducing overall demand and creating a powerful deflationary force, further entrenching a feudal economic structure with fewer 'lords' and more 'serfs.'

Widespread AI-driven job loss will reduce consumer spending. In response, businesses will be forced to cut costs further by accelerating AI adoption, which in turn leads to more job losses and even lower consumption, creating a vicious cycle.

The immediate threat of AI isn't mass layoffs, but rather its impact on future hiring. During the next economic upswing, companies may opt to invest in AI-driven restructuring and reorganization instead of rehiring laid-off white-collar professionals, permanently reducing job opportunities.

Stock market investors are pricing in rapid, significant productivity gains from AI to justify high valuations. This sets up a binary outcome: either investors are correct, leading to massive productivity growth that could disrupt the job market, or they are wrong, resulting in a painful stock market correction when those gains fail to materialize.

AI challenges traditional monetary policy logic. Historically, lower interest rates spur capital investment that creates jobs. However, if lower rates now incentivize investment in job-reducing AI, the Fed's primary tool for boosting employment may become less effective or even have ambiguous effects, a new dynamic policymakers must understand.

For current AI valuations to be realized, AI must deliver unprecedented efficiency, likely causing mass job displacement. This would disrupt the consumer economy that supports these companies, creating a fundamental contradiction where the condition for success undermines the system itself.

The most immediate systemic risk from AI may not be mass unemployment but an unsustainable financial market bubble. Sky-high valuations of AI-related companies pose a more significant short-term threat to economic stability than the still-developing impact of AI on the job market.

The US economy is currently experiencing near-zero job growth despite typical 2% productivity gains. A significant increase in productivity driven by AI, without a corresponding surge in economic output, could paradoxically lead to outright job losses. This creates a scenario where positive productivity news could have negative employment consequences.

The labor market faces a dual threat. Weak demand, linked to tariffs and deglobalization, has already pushed job growth to zero. As AI adoption accelerates productivity, it could further suppress labor demand, potentially tipping the economy into a state of net job decline.