Death by a thousand cuts sounds more believable. I concur with your position: instead of it being black-and-white, it could simply lead to less demand for engineers as the "building blocks" -- really common open source technologies with nearly omniscient presence -- are essentially commoditized.
On the other hand, I could also see a reality where, since many low-level problems are solved for you, management expects more out of you, so the number of engineers stays about the same, but you get a higher level of productivity.
Agree with your second paragraph and that's actually been my real-world experience. I also think there's another effect where commoditizing a technology leads to the creation of jobs that specialize in that technology. With easy-to-obtain game engines, suddenly more companies are interested in using them, which itself leads to an increase in demand for engineers, just with different skillsets.
I wouldn't put money on this balance lasting forever though. To me, that's too close to dismissively saying "it's different this time", with regards to our profession.
On the other hand, I could also see a reality where, since many low-level problems are solved for you, management expects more out of you, so the number of engineers stays about the same, but you get a higher level of productivity.