In a recent address to the Aiken Chamber of Commerce in South Carolina, Richmond Fed President Thomas Barkin highlighted ongoing trends in consumer spending and the job market, noting, “We’re not in 2022 anymore. Consumers aren’t as flush; they are making choices.” He pointed out that while spending remains robust, particularly among higher-income groups, economic conditions have shifted.
Barkin also discussed the rapid adoption of artificial intelligence (AI) across industries, especially in call centers and software development. He observed a significant increase in job applicants for available positions, indicating a shift in hiring dynamics.
UBS analyst Nana Antiedu monitored Barkin’s remarks closely. His comments followed the release of the Federal Reserve’s Beige Book, which initially seemed uneventful but revealed key insights. One notable section discussed how AI might reduce labor demand, with employers reporting layoffs and attrition driven by economic uncertainty and increased AI investment.
Fed Governor Christopher Waller recently tackled the ongoing debate about whether new technologies create or eliminate jobs during his talk at DC Fintech Week. He explained that with technological innovation, there’s often a time lag between disruptions and benefits. “The disruptions come first; the benefits take time,” he said. Historical examples, such as the emergence of automobiles, illustrate how initial job losses can lead to new opportunities in unexpected ways.
A recent study by Stanford economists revealed a 13% decline in employment in occupations most affected by AI, primarily in support and administrative roles. Retailers, in particular, are reducing staff in call centers and IT, mainly through attrition, although some foresee potential layoffs in the coming year. A New York Fed survey indicates that while AI hasn’t yet led to widespread layoffs, it is reshaping hiring practices, with some firms scaling back and others seeking skilled workers.
Despite concerns, history shows that technology generally boosts productivity and living standards. Although some fear that machines will replace human labor, historical data suggests that capital and labor complement each other. The U.S. capital stock has grown significantly since 1950, yet unemployment rates have remained stable.
Economists tend to be techno-optimists, believing that new technologies drive economic growth and job creation. The concept of “creative destruction,” introduced by economist Joseph Schumpeter, remains relevant today. Recent Nobel Prize winners have explored how productivity-enhancing innovations improve living standards.
While AI will create both winners and losers, questions remain about how to measure its impact on the economy. As firms adopt AI to boost productivity, this growth contributes to gross domestic product (GDP). The competitive landscape of technological innovation in America has historically driven down costs, suggesting that AI’s proliferation will continue if costs remain low.
A Goldman report estimates that AI’s economic impact stands at roughly 9.2%. However, skeptics like Elliott Management caution that this AI cycle may be “overhyped.” Morgan Stanley analysts suggest that while AI adoption is swift, its effects on economic data may not be fully realized until later this decade.
What’s clear is that the early signs of AI-induced job displacement are already being felt.
