Torsten Slok, a top economist at Apollo, recommends looking to the early 21st century for clues about what AI will bring to the labor market. He’s not talking about a comparison to the dot-com boom, but rather about the impact that China’s manufacturing boost will have on American jobs.
In a blog post on Tuesday, Throck recalled that China joined the World Trade Organization in the early 2000s, when competition for factory jobs around the world intensified as China became more involved in the global economy. But Throck said the initial decline in U.S. manufacturing jobs was offset by other economic factors, such as growth in the services sector.
The economist now sees the current AI-driven economy following a similar trajectory.
“AI Shock follows the same strategy,” he said. “This time the displacement forces are different, affecting cognitive labor and white-collar jobs rather than factory floors. But all the other elements of the structure are surprisingly familiar.”
The scenario that Throck sees unfolding begins with strong economic disruption that quickly leads to significant job losses in at-risk industries. However, a wave of growth will follow, keeping unemployment low and contributing to the stabilization of the economy as a whole.
Throck has previously said he believes the AI revolution should be seen as a positive economic force, rather than a job killer as some predict. He recently invoked Jevons’ paradox to explain why.
This economic principle was inspired by British economist William Stanley Jevons, who theorized that increased productivity would lead to increased demand for labor as the cost of services decreased. By that logic, AI should create more jobs in the long run as companies adapt their workforce to meet new demands.
Given the events of 2001, Sløk seems more confident than ever that 2001 will spark further economic growth.
“If history is any guide, the benefits will be substantial,” Throck wrote. “Just as cheap Chinese raw materials helped U.S. companies grow and hire, AI is already accelerating business formation and productivity gains across the economy.”
He emphasized that more than half of the job growth seen in the United States since 1980 is due to jobs that were only created since then and did not exist before that decade.
“The bottom line is we’ve seen this before,” Sløk added. “Just as the China Shock gave way to new industries and stronger businesses, AI will drive productivity gains and create opportunities to more than replace the jobs lost today.”