“While we think that AI may well eventually lead to higher unemployment and deflation, the timing is very unclear,” a team led by Dirk Willer said in a Friday note. This uncertainty points to a dovish policy bias, with Citi saying risks are “skewed towards lower Fed Funds, rather than higher ones”, News.Az reports, citing CNBC.
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Strategists note that debate has shifted from whether AI investment is excessive to how quickly the technology could disrupt white-collar employment. While Citi acknowledges rising concern following rapid advances in generative AI, it said current labor data still show a limited broad-based impact, with indicators suggesting the labor market is “holding up quite well.”
“Essentially, early career programmers and customer service personal have seen a weak job market, but otherwise it is not easy to find much in the data,” the strategists wrote.
Looking ahead, the team warns that implementation frictions — including regulation, corporate adoption hurdles and energy constraints — are likely to slow the real-world pace of displacement.
Although AI capabilities may improve exponentially, the strategists believe deployment across companies will be “much more linear,” delaying macro effects.
Energy constraints also remain a key brake on AI adoption, with Citi strategists arguing that with current supply levels, “it would not be possible to replace a significant part of global white-collar work with AI.”
As long as this bottleneck persists, they believe there will continue to be demand for human labor. Over time, however, efficiency gains and investment in the energy system could ease the constraint — but the strategists said the process will “probably take time.”
In the longer-term, the team sees a scenario where strong productivity gains coexist with job losses and falling prices, particularly if income gains from AI remain highly concentrated and captured by a relatively small AI elite. Under that backdrop, they argue central banks should retain a dovish bias over time.
Cross-country exposure varies widely. Citi flagged the U.S. and the U.K. as among the most vulnerable developed markets due to their high share of white-collar service employment. In emerging markets, Israel, South Korea and central and eastern Europe appear more exposed.
