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The idea is that they or other businesses will spend their new surplus on hiring workers to do what can't be automated.

This would have to be in a different industry though, no? Inherently the point of automation is to shrink the amount of labor required to do a task. So as to your comment and in my example of customer service, employees laid off from company A would need to acquire technical skills to manage the new automation in that industry (likely that company B has already, or will adopt), or move to a different industry completely.

The problem I see is that everyone is automating though. Or is it assumed that enough tasks can't be automated to actually effect unemployment?

It could be. The surplus flows to the owners of the company.

They can choose to a) re-invest it in the company, creating new jobs there, b) re-invest it in new/other companies, creating new jobs there, c) spend it, creating new jobs wherever the money is spent.

But yes, retraining is generally required to some degree -- as jobs become more productive, people need to learn how to do those jobs!

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