As if on cue, days after a viral essay warned of an artificial intelligence-fueled economic catastrophe, payments company Block said it was laying off nearly half its staff. The company, which owns Square and Cash App, explicitly linked the cuts to AI tools that have “changed what it means to build and run a company.”
That is a deep cut, even for the tech industry, which bulked up during the pandemic and has been shedding thousands of jobs in recent months. And unlike most of other industry cuts, executives at Block weren’t “right-sizing” or “reducing headcount in anticipation of future AI efficience” — the company adopted AI tools, and as a direct result, it says it no longer needs as many workers.
Block’s shares surged more than 15 percent Friday.
On the surface, the news looked exactly like what a viral, market-sinking blog post from Citrini Research speculated about earlier this week: Increasingly sophisticated AI is about to create a doom loop for white-collar workers, as “agents” replace office workers, leading companies to shed jobs and fatten their profit margins, leading to more investment in AI, leading to more layoffs.
But don’t let recency bias drag you into a pit of despair.
Some jobs, especially low-level coding, do seem to be under pressure as AI bots get better at mimicking human-generated software. And that is a real conundrum, especially for those who weaponized the words “learn to code” to taunt their fellow man on Twitter in the 2010s.
But is this an economy-wide phenomenon bound to plunge the world into a recession? No. Not yet, anyway.
While no one has a crystal ball to say for sure, we do have a lot of recorded history to look back on to say authoritatively that tech — even the most disruptive — doesn’t shrink an economy. Quite the opposite: Tech tends to increase productivity, which gives people more time and money, which fuels growth and, yes, jobs.
Banks in the latter half of the 20th century were able to automate some of the tasks performed by accountants and bookkeepers, and the rise of the ATM initially reduced the number of bank tellers. But, as JPMorgan notes, those innovations allowed banks to open more branches, increasing employment overall.
The internet, famously, also ushered in a productivity spike. In the 1980s, it took eight employees to generate $1 million in revenues; by the 2000s, it took only six.
The labor market has been cooling, though layoffs remain at levels economists consider historically manageable. The unemployment rate in January was at 4.3 percent, about half a percentage point higher than it was in late 2023, when the generative-AI boom began.
Which isn’t to say AI won’t replace some jobs. But automation has been buffeting the labor market for decades, and it hasn’t led to the kind of universal structural collapse some are currently forecasting. It’s also worth noting that the most dire forecasts often come from the very executives who stand to profit the most from selling the AI products they claim are transformative.
The 7,000-word essay from Citrini claimed at the outset to be different from the “AI doomer fan-fiction” that’s become popular. But it was, in fact, mostly AI doomer fan-fiction — a dystopian thought experiment imagining a scenario in which AI is so successful it contracts economic growth and drives the US unemployment rate to more than 10 percent by 2028. It went viral in a similar way as Matt Shumer’s similarly long-winded “Something Big Is Happening” blog post earlier this month, which argued that the world was underestimating the looming impact of AI on the labor market, and compared the current moment to the early days of Covid-19, before the scale of the economic impact could be measured.
Citadel Securities’ Frank Flight wrote a forceful rebuttal Tuesday of the Citrini report, arguing that current data simply doesn’t show AI adoption happening fast enough to meaningfully displace workers. Flight also suggests the report fundamentally misunderstands macroeconomic fundamentals.
For a situation in which AI produces “a sustained negative demand shock,” a lot of improbable things would need to happen all at once, he argues. AI adoption, which is currently slow and expensive, would have to accelerate significantly; none of the folks who lose their jobs to AI would be employable elsewhere; and, perhaps least likely, governments and central banks around the world would have to sit on their hands and let it all crumble.
He adds: “It is also worth recalling that over the past century, successive waves of technological change have not produced runaway exponential growth, nor have they rendered labor obsolete.”
Many other analysts have cast the Citrini hypothetical as far-fetched.
“The argument leans heavily on narrative and emotion rather than hard evidence,” wrote Deutsche Bank’s Jim Reid of the Citrini report. “That doesn’t mean it will ultimately be wrong,” he added, but “the vibes-to-substance ratio is undeniably high.”
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