The job market may be at risk from AI, but it won’t be an apocalyptic white-collar recession that some have predicted.
Claudia Sahm, the top economist best known for her recession indicator, the Sahm Rule, told Business Insider she’s skeptical of the doomsday scenario sketched out in a viral report by Citrini Research this week.
The report, which illustrated one scenario where AI job losses sent the unemployment rate soaring to over 10%, collided with broader investor anxiety over the artificial trade this week, causing the Dow to plunge more than 800 points on Monday.
But Sahm says she’s more worried about a different situation: if AI were to displace workers more slowly.
That’s because, should AI spark rapid job losses as Citrini describes, the government would most likely step in to bolster the economy with rapid fiscal and monetary stimulus, making it unlikely to be as catastrophic as it sounds.
“I do think that the kind of doomsday scenario they sketch out, there would be a pretty forceful policy response,” she said, speculating that pandemic-era stimulus checks or a complete rewrite of the US tax code could be used to support the economy in the Citrini scenario.
If job losses are “more muted,” it’s more likely policymakers will hesitate before intervening.
“I worry more about that scenario, a slow-moving, slowly building crisis,” she said of the potential for economic pain.
Fears that AI could wipe out swathes of white-collar jobs are picking up at a time when the US labor market has already started to lose some steam. Hiring has weakened over the past year, and layoffs have trended higher for the past five years, according to data from the Labor Department.
The market is also becoming flooded with prognostications about how AI could accelerate job losses. Prior to Citrini’s report, Goldman Sachs predicted that AI could replace around 6%-7% of all US workers.
Sahm comes off as more of an AI optimist. She believes in the tech’s potential to turbocharge productivity and revamp the US economy, but acknowledged she had been spending more time thinking about AI’s impact on the labor market.
While she’s not expecting a recession in the US this year, she speculated that a sharp increase in layoffs or a sudden market correction could easily tip the US into a downturn.
She also said she was considering revising her predicted odds of a recession upward from the current 15% after seeing the volatility in markets this week.
“What if AI does so well that it basically takes down the whole economy?” she said of one possible scenario. “It is still nowhere near my base case, but just watching the market react and realizing there’s a lot of uncertainty.”
