Macroeconomic Indicators & Trends

May 05, 2026

Is AI the New China Shock?

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Torsten Slok

Partner, Chief Economist

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When China joined the WTO in 2001, US manufacturing was hit hard, but US nationwide unemployment stayed remarkably low because offsetting forces like service sector growth, export gains and business expansion absorbed much of the blow.

The AI shock is following the same playbook. The displacement force is different this time, impacting cognitive and white-collar work rather than factory floors. But every other element of the structure is remarkably familiar: a powerful disruption, immediate job losses in exposed sectors, and a wave of offsetting gains that keep headline unemployment low, see chart below.

And if history is any guide, the gains will be substantial. Just as cheaper Chinese inputs helped US businesses grow and hire, AI is already accelerating business formation and productivity gains across the economy. Half of post-1980 job growth came from occupations that didn't exist in 1980.

The bottom line is that we have seen this before. Just as the China shock gave way to new industries and stronger businesses, AI will drive productivity gains and create opportunities that will more than replace jobs lost today.

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