New York
\n \u00a0\u2014\u00a0<\/p>\n
\n 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.<\/a> The company, which owns Square and Cash App, explicitly linked the cuts to AI tools that have \u201cchanged what it means to build and run a company.\u201d\n <\/p>\n \n 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\u2019t \u201cright-sizing\u201d or \u201creducing headcount in anticipation of future AI efficience\u201d \u2014 the company adopted AI tools, and as a direct result, it says it no longer needs as many workers.\n <\/p>\n \n Block\u2019s shares surged more than 15% Friday.\n <\/p>\n \n On the surface, the news looked exactly like what a viral, market-sinking<\/a> 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 \u201cagents\u201d replace office workers, leading companies to shed jobs and fatten their profit margins, leading to more investment in AI, leading to more layoffs.\n <\/p>\n \n But don\u2019t let recency bias drag you into a pit of despair.\n <\/p>\n \n 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 \u201clearn to code\u201d<\/a> to taunt their fellow man on Twitter in the 2010s.\n <\/p>\n \n But is this an economy-wide phenomenon bound to plunge the world into a recession? No. Not yet, anyway.\n <\/p>\n \n 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 \u2014 even the most disruptive \u2014 doesn\u2019t shrink an economy. Quite the opposite: Tech tends to increase productivity, which gives people more time and money, which fuels growth and, yes, jobs.\n <\/p>\n \n 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<\/a>, those innovations allowed banks to open more branches, increasing employment overall.\n <\/p>\n \n 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.\n <\/p>\n \n The labor market has been cooling, though layoffs remain at levels economists consider historically manageable. The unemployment rate in January was at 4.3%, about half a percentage point higher than it was in late 2023, when the generative-AI boom began.\n <\/p>\n \n Which isn\u2019t to say AI won\u2019t replace some jobs. But automation has been buffeting the labor market for decades, and it hasn\u2019t led to the kind of universal structural collapse some are currently forecasting. It\u2019s 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.\n <\/p>\n \n The 7,000-word essay <\/a>from Citrini claimed at the outset to be different from the \u201cAI doomer fan-fiction\u201d that\u2019s become popular. But it was, in fact, mostly AI doomer fan-fiction \u2014 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% by 2028. It went viral in a similar way as Matt Shumer\u2019s similarly long-winded<\/a> \u201cSomething Big Is Happening\u201d 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.\n <\/p>\n