Lower costs could have other consequences, other than people working less: general inflation; inflating rents/property prices; lower salaries for the same job; longer working hours (officially or not)
I think what you mention is one possible effect, but there are many and it is not clear which one dominates.
that's good - they're able to recover some of their time. Just because this "own time" doesn't count towards official GDP, doesn't mean it isn't an improvement.
This can be shown in absolute clarity: we are paid to work and not paid to not work.
You are forced to work, because you have expenses that you must pay: food, shelter, healthcare. If you do not work, you die.
You buy stuff to try to maximise your enjoyment in each unit of time, or to maximise your time: dishwashers to do the dishes, air fryers to cook food quicker. An apartment closer to work. A nanny, a cleaner, an accountant.
Some people use that extra time to... do more work. And because they do, the economy rewards them; inflation and expenses rise, and now everyone else needs to spend more time working too.
The exception to this is that it's possible to hit a threshold where your projected wealth is greater than your projected expenses for the rest of your life, and this allows you to work less. This threshold is unreachable for the vast majority of people in the world, and even the US, at least until the few last years of their lifes.
Not neccessarily, people have less costs now, so some people can now just choose to work less - which would shrink the economy.