Wharton's Jeremy Siegel Downplays Concerns Of AI Causing Mass Unemployment After Block Cuts 4,000 Jobs: 'If AI Were To Double Productivity...'

• Siegel noted there is an increasingly popular narrative that AI will trigger widespread job destruction and a macroeconomic downturn.
• However, he thinks that this view misses two centuries of economic history and the central insight of growth theory, that productivity gains ultimately expand output, incomes, and ultimately demand.
• Siegel also addressed concerns about AI-driven job losses, saying that while some occupations will disappear, others will emerge.

Jeremy Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School of Business, on Tuesday downplayed concerns that artificial intelligence will result in mass unemployment, days after Block Inc. announced (XYZ) 4,000 job cuts.

The economist noted that there is an increasingly popular narrative that AI will trigger widespread job destruction and a macroeconomic downturn. However, he thinks this view misses two centuries of economic history and the central insight of growth theory, that productivity gains ultimately expand output, incomes, and ultimately demand.

“If AI were to double productivity—a simplifying illustration—today’s GDP could be produced in half the time. Workers would not choose to work half as much; they would likely work somewhat less and earn significantly more,” he said.

Some Occupations Will Disappear, But Others Will Emerge, Says Siegel

Siegel also addressed concerns about AI-driven job losses, saying that while some occupations will disappear, others will emerge.

“Real wages track productivity over time, and higher incomes generate new categories of spending—better services, better goods, more leisure, more health care, more travel. The macroeconomic absorption mechanism is powerful,” he said.

The economist added that AI is not an apocalypse but an accelerator of productivity.

Keeping Things In Perspective

Siegel said that while layoff announcements grab headlines, they should still be kept in scale. He added that even large percentage cuts at firms are still small when compared to a 160-million-strong labor force.

“If real GDP continues to expand near 3 percent, as several trackers suggest for the first quarter, that arithmetic implies rising productivity. You cannot grow output at that pace with sharply slower labor-force growth unless output per worker is increasing,” he added.

Amid the slump in tech stocks, the economist said that markets are currently rotating, not collapsing. He added that mega-cap AI stocks could deliver returns between 0% to 10% this year, underperforming the rest of the market, which he believes could gain between 10% to 15%.

“That rotation is underway. NVIDIA now trades near 15 times 2027 earnings, hardly bubble territory, but the market is appropriately discounting the speed of innovation and the possibility that moats narrow faster than expected,” Siegel added, while noting that the broadening is healthy.

Meanwhile, U.S. equities declined in Tuesday’s pre-market trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 1.59%; the Invesco QQQ Trust ETF (QQQ) fell 2.03%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) declined 1.6%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bearish’ territory.

Also See: Nasdaq, S&P 500 Futures Decline As US, Israel Launch New Strikes On Iran — MDB, ASTS, CRDO, AAPL On Traders' Radar Today

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