The Smith quote is a demand-side dynamic: increased wealth > increased activity > increased demand.
Sprawl is a supply-side dynamic, increasing the minimum viable cost floor: greater sprawl, greater frictions, transport and commute delays, congestion and travel costs. For a given unit of labour you're incurring a greater overhead in (dead) travel time. Efficiency is decreasing, but labour demands its minimum viable wage.
The Smith quote is a demand-side dynamic: increased wealth > increased activity > increased demand.
Sprawl is a supply-side dynamic, increasing the minimum viable cost floor: greater sprawl, greater frictions, transport and commute delays, congestion and travel costs. For a given unit of labour you're incurring a greater overhead in (dead) travel time. Efficiency is decreasing, but labour demands its minimum viable wage.