While technology creates jobs in the long run the nearer term is usually quite rocky, and the numbers show us very close to falling off the ledge.
During the Great Recession some 8.6 million jobs were lost, bringing the total number of unemployed to over 15 million people by the end of 2009 (source). The difference between these numbers is because roughly 7 million people were unemployed when the Great Recession began.
If you’re not familiar with unemployment numbers, 7 million may sound scary, but it’s a good number. In mid-November 2024, there are currently about 7 million unemployed people, leading to an unemployment rate of 4.1%. Economists want unemployment to be around 3-5%. Above that and too many people are out of work; below that and labor becomes expensive making it hard for companies to hire to grow. This CEPR article, Figuring our efficient unemployment, goes into more technical analysis.)
So today the US is pretty ideal in terms of unemployment. If we lost 8 million jobs in a year or two, we’d be in bad shape, similar to the Great Recession. One of the things that made the recession so “great” (in terms of impact), was not just the number of jobs lost but that so many jobs were lost permanently. It wasn’t a slowdown and people rehired later, but a loss of certain classes of jobs due to technological automation.
Goldman Sachs predicted 300 million full-time jobs would be automated in some way by AI (CNN article, Goldman Sachs briefing), estimating that a quarter of all work in the US and Europe could be completely done by AI. Unlike the Great Recession which impacted low wage jobs the most, this will impact high-paying white-collar jobs.
I’ve written in the past about what AI will do to the labor market (see ChatGPT is Just a Calculator . . . Crossed with a Nuclear Reactor and No, AI Isn’t Going to Kill You, but It Will Cause Social Unrest - Part 1 & Part 2).
But the short term is very different, and you don’t need to take my word for it. There’s approximately 160 million employed workers in the US. 8 million is 5% of 160 million. To get another Great Recession we only need to have a net loss of about 2.5% of jobs each year to AI.
I stand by my claims, and those of others, that in the long-term AI will be a productivity booster. But job losses precede job gains, and the people who lose the jobs may not be the same people who gain the new jobs. In short, even moderate near-term job loss to AI in the next few years can bring the US back to another Great Recession.
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