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Is AI behind slow hiring in the US? Federal Reserve chair Jerome Powell says…
Is AI behind slow hiring in the US? Federal Reserve chair Jerome Powell says…
Federal Reserve chair Jerome Powell on Wednesday (local time) appeared more upbeat about the US economy, saying it was on a “firm footing”, but was more equivocal about artificial intelligence (AI) and its impact on jobs and growth.
“The US economy expanded at a solid pace last year and is coming into 2026 on a firm footing. While job gains have remained low, the unemployment rate has shown some signs of stabilization and inflation remains somewhat elevated," Powell on Wednesday.
However, when asked about the impact of AI, the Fed chair offered a classic Powell response, which essentially boiled down to "hard to say".
What did Powell say on AI and the US economy?
"So everyone of course is watching AI and the deployment and, you know, trying to understand exactly what's happening. And there's a wide range of possibilities," Powell said when asked about how AI would impact jobs and the US economy."Anyone who uses [AI is] amazed at what it can accomplish, right?" the Fed chair said, explaining that technological progress always amounts to the destruction of some jobs and the creation of new opportunities.
"So every technological wave will eliminate some jobs and create other jobs. And it's always been the case if you look back, wave after wave after wave, there will be some disruption. But ultimately technology increases productivity, which is the basis for rising wages," Powell explained.
The Fed chair went on to say that short-term job losses were already being observed due to the advent of AI, but conceded that it was difficult to predict the impact of AI in macroeconomic terms.
"So how to think about it in in macroeconomic terms, it's very hard. You know, we we can look at the aggregate data. We can analyze, for example, [that] there is some connection, it appears, between the low hiring rate for recent college grads and AI. But it's not the main or only driver," Powell said.
"You hear large companies saying, many of them saying, that they either won't be hiring for some time or that they're hiring less, or that they're laying people off. And they tend to refer to AI when they when they do that," the Fed chair further said.
"So we're all watching and learning and it could it could certainly have pretty significant effects on the economy, the workforce, and our society. We don't really have the tools to address the concerns that may arise, but we have a lot of people who focus on analyzing it, and try to understand what the macroeconomic implications are, which which is our job," he added.
AI and GDP growth in the US
Powell's comment comes days after CNBC, citing multiple analyses, reported that AI was not the main driver of the US economy, despite popular assumptions.With the AI boom driving up company valuations, creating large investments, and influencing GDP, many economists and market participants had suggested that it was driving the US economy, which had become stagnant otherwise.
However, consumption continues to be the main driver of GDP growth, with investment in AI being the second, reported the publication.
"AI is an important part of the growth story, but it's not the only part of the growth story. That's a narrative that's out there, that if we didn't have the AI capex, GDP would have slumped last year. And that's simply not true," Prajakta Bhide, the US economic strategist of economic research firm MRB Partners was quoted as saying by CNBC.
"Without an AI boom, there would have certainly been less GDP growth last year, but there would also be fewer imports, so that overall real growth would still have been decent, above 1.5%, due to solid personal consumption," she wrote in a report dated 8 January.
Similar claims were made by the Bespoke Investment Group, which, in December last year, published a chart breaking down the components of estimated GDP growth in the US, for which official figures are yet to be released.
“Over the last two quarters, categories linked to AI spending only accounted for 15% of growth, and their share of GDP is less than 5% overall,” the group said.
Source: LiveMint
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