AI Job Loss Is Accelerating – and Washington Won’t Stop It

Editor’s note: “AI Job Loss Is Accelerating – and Washington Won’t Stop It” was previously published in January 2026 with the title, “CHAOS Economics: How to Survive and Thrive Amid the AI Job Collapse.” It has since been updated to include the most relevant information available.

For the past few years, the headlines have told one story.

The market’s near all-time highs. Corporate profits are booming. AI is minting millionaires in real time.

And yet…

Talk to your friends. Scroll LinkedIn. Look at your grocery receipt.

Something doesn’t feel right.

Mid-career professionals are “open to work” for months. Real wages feel stuck. Rent keeps climbing. The stock market says “prosperity,” but the real economy is voicing something else.

That disconnect is structural.

We have officially entered a new economic epoch, something academics call “structural adjustment” and doomers call “collapse.”

I call it CHAOS Economics. 

In this new world, there are only two types of people: the serfs who work for the algorithm, and the lords who own it. 

We are staring down the barrel of an AI-driven Engels’ Pause – an era when GDP rises but workers’ purchasing power remains flat as capitalists’ profits soar. 

To put it bluntly, the Titanic has already hit the iceberg. And, much like on the Titanic, the band is still playing and the cocktails are still being served in first class – but the water is rising in steerage.

If you want to survive, it’s time to board the lifeboat…

The iceberg didn’t appear overnight. It’s been building for years, hidden below the surface. 

Here’s what it looks like.

How AI Automation Creates Job Loss: The Two Forces Driving CHAOS Economics

We are witnessing the collision of two unstoppable forces moving in opposite directions.

Force 1: AI, the Deflationary Tsunami 

Artificial intelligence is the single greatest deflationary force in human history; the ultimate cost-cutter. 

We might have once expected robots to replace assembly line workers – and that’s still coming. Tech titans Amazon (AMZN), Tesla (TSLA), and China’s BYD have said they aim to use humanoid robots in their operations. Most recently, Hyundai – in partnership with Boston Dynamics – unveiled its humanoid robot, Atlas, designed to “ease physical strain on human workers” and “pave the way for wider use of the technology.” In our view, that’s corporate speak for “replace human workers”…

But right now, software is the more immediate threat. Before physical bots arrive at scale, AI software is already starting to replace once-high-status jobs: interpreters, proofreaders, code writers, logistics managers.

Microsoft’s late-2025 analysis of AI job exposure depicts a terrifying situation. 

Management analysts, customer service reps, sales engineers… We are talking about 5 million white-collar jobs – the bedrock of the American tax base – facing extinction.

When a company can replace a $120,000-a-year mid-level manager with a $20-a-month subscription to an AI Agent, they don’t think about it. They just do it. It’s their fiduciary duty. This collapses wages and labor demand through “Technological Deflation.”

Force 2: The Inflationary Response

If everyone loses their job, the entire consumer economy collapses.

The government cannot allow a deflationary depression and risk 20%-plus unemployment turning into a revolution. So, it will do the only thing it knows how to do: print money.

The government will print cash by the trillions, calling it “stimulus,” then “relief,” until eventually, it’s just “universal basic income” (UBI).

This is a form of monetary dilution. Economists call this fiscal dominance. I call it “Currency Hallowing.”

And then comes the death spiral … where more job loss leads to more money printing, which leads to more job loss and more money printing, in an accelerating cycle.

This is CHAOS: Currency Hallowing And Overautomation Spiral.

Prices for things made by AI (software, media, digital entertainment) will crash to near zero. But prices for limited commodities (houses, land, food, energy, healthcare) will skyrocket because the dollar is being debased to fund the unemployed masses.

The result? A society where we have a supercomputer in our pockets, but we can’t afford a steak dinner.

AI Job Displacement Mirrors the Industrial Revolution

“But Luke,” the tech optimists might say. “Technology always creates more jobs than it destroys. Look at the tractor or the loom!“

To which I’d say: you’re ignoring Engels’ Pause, named after Friedrich Engels, the 19th-century economist who documented what happened when the Industrial Revolution collided with labor markets.

Between 1790 and 1840, Great Britain’s GDP growth rate exploded from 0.2% to 3.2% annually. Technology (steam engines) created massive efficiency gains. Corporate profits doubled, increasing by over 20% from the late 18th to the mid-19th century. 

But here’s what Engels noted: while the Industrial Revolution was making Britain incredibly rich, most Brits saw their lives get much worse, not better.

For the average worker, real wages remained flat or fell for 50 years. Workers’ share of the national income dropped from 50% to 45%, even as total wealth soared. And in Manchester and Liverpool, life expectancy for working-class children fell to just 17 years.

The wealth did eventually trickle down… and the Industrial Revolution did eventually lead to more jobs… half a century later.

The weavers who lost their jobs to power looms didn’t become “machine repairmen.” They starved. They rioted and, often, were shot by the military or shipped to penal colonies. It took two full generations for the labor market to adjust.

We are entering an AI-driven Engels’ Pause. But this time it will be faster and more brutal.

The steam engine took a century to deploy. ChatGPT hit 100 million users in two months. We’re compressing 50 years of displacement into a single decade.

And the disruption isn’t just coming for low-skill manual labor this time. It’s coming for the accountant, the lawyer, the editor… It’s coming for you.