Citi strategists warn that artificial intelligence poses a real disruption risk to labor markets, though the timing remains highly uncertain. In a Friday note, a team led by Dirk Willer said AI could eventually lead to higher unemployment and deflation, but implementation hurdles mean effects will likely be gradual.

While debate has shifted from whether AI investment is excessive to how quickly it could disrupt white-collar employment, current labor data still show limited broad-based impact. Early career programmers and customer service workers have seen weaker job markets, but other sectors appear resilient. The strategists note that AI capabilities may improve exponentially while deployment across companies will be "much more linear."

Energy constraints remain a key brake on AI adoption, with current supply levels insufficient to replace significant portions of global white-collar work. As long as this bottleneck persists, demand for human labor will continue. Over time, efficiency gains and investment in energy infrastructure could ease the constraint, though the process will "probably take time."

Cross-country exposure varies widely, with the U.S. and U.K. 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. The uncertainty points to a dovish policy bias, with Citi saying risks are "skewed towards lower Fed Funds, rather than higher ones."