You are correct in that as material objects become cheaper and people still have jobs, people with jobs accumulate more material objects and standards of living rise.
But that doesn't mean that automation will keep human labour from being relegated to those who specifically want a task less efficiently done by a human hand. Robots became better than us at manual labour, so long as they were doing the exact same thing over and over again, and now we are getting robots that are better than us at manual jobs with more varied demands.
Going by our current state of software, we will eventually reach a point where any necessary profession is most efficiently done by a robot, even intellectual ones. From that point, any human labour is based in illogical sentimentality, as a robot could do the same thing better and cheaper.
Robots could make robots, robots could repair robots, robots could design new robots for new tasks, and humans find themselves with no place in the job market, only left to reap the fruits of robotic labour and engage in whatever hobbies they wish.