A famed strategist who called the dot-com bubble says Citrini's viral labor-market warning is already playing out

• Société Générale's Albert Edwards warns AI is already disrupting consumers and the labor market.
• Job growth is slowing despite GDP growth, and spending is flatlining.
• Edwards' comments come on the heels of Citrini Research's thought experiment that spooked investors.

Citrini Research made waves in markets this week with a hypothetical thought experiment about how AI could dramatically disrupt the job market in just a couple of years. It was the stuff of dreams for permabears like Société Générale's Albert Edwards.

The famed strategist, who called the dot-com bubble and regularly reminds investors of the bear case in markets, naturally had thoughts on the dystopian report, saying in a February 25 note to clients that he agrees AI will lead to bumps in the road for the labor market.

But he also took it a step further: he's already seeing evidence that such a scenario is starting to play out, he said.

"Macroeconomic doomsday scenarios foretelling what might happen by (a distant) 2028 are gaining attention. But we might not have to wait until then," Edwards wrote in a February 25 client note. "The adverse effects on jobs are already plain to see and consumption, in aggregate, is heading for a brick wall as a result."

Edwards shared a couple of compelling charts that he argues illustrate the impact of AI on the workforce already.

The first lines up GDP growth with year-over-year job growth. While GDP has settled into a fairly strong growth rate after coming down from its 2021 highs, job growth has only continued to cool. Edwards said that it's "blindingly obvious" that this can be attributed to AI replacing jobs.

The chart is reminiscent of what investors last year started calling "the scariest chart in the world" — where job openings continued to fall while the S&P 500 ripped to record highs. Investors continued to celebrate AI's power while largely shrugging off predictions of negative economic impacts.

Edwards' second chart implies that we may be about to see those impacts. It shows incomes flatlining over the last few years as AI increasingly competes with workers in the labor market.

Curiously, consumer spending has continued to increase, despite the two statistics' historical tendency to move in lockstep. Edwards cited a falling savings rate as an explanation, saying consumers are dipping deeper into their wallets to meet their spending needs and habits.

Indeed, the savings rate has fallen to 3.6%, one of the lowest levels since 2006, when consumers were optimistic about the economy amid a red-hot housing market, he said.

That, he warned, puts the economy in a precarious position, as he doubts consumers will keep saving less and less. If the savings rate remains unchanged from here, consumer spending will begin to stagnate, Edwards said.

"In my opinion, unlike in the late 1990s, if you think the US household SR has recently collapsed to 3½% because households 'anticipate higher future income growth', then you need to think again," he wrote, with "SR" referring to the savings rate.

He added: "I believe the recent SR slump is a short-term reaction to real incomes hitting a brick wall and the SR will soon either stop falling — in which case consumption growth will be zero — or rise on a precautionary basis which would cause overall consumption to fall."