Federal Reserve chairman Jerome Powell admits fear of AI killing jobs is real

Federal Reserve chairman Jerome Powell recently acknowledged growing concerns that artificial intelligence (AI) could lead to widespread job losses, calling it a “real and difficult issue” for the US economy. Speaking at a press conference after the Fed’s latest policy meeting, Powell said the labor market may not be as strong as it appears. Despite a 4.3% unemployment rate and steady consumer spending, “job creation is pretty close to zero” once data adjustments are made, he said. Powell linked part of that weakness to companies using AI to do more work with fewer employees.Powell noted that many large companies have recently paused hiring or cut jobs, explicitly citing AI as the reason. “Much of the time they’re talking about AI and what it can do,” he told reporters. “We’re watching that very carefully.”Recent layoffs at firms like Amazon, Target, and Paramount illustrate his point. A report from Challenger, Gray & Christmas found nearly 946,000 layoffs in the U.S. this year, with over 17,000 tied directly to AI. Economists have even coined a term for the slowdown — the “Great Freeze.”While some fear this surge in tech spending could resemble the dot-com bubble, Powell dismissed the comparison. “These companies actually have earnings,” he said, adding that AI projects reflect long-term bets on productivity rather than short-term speculation.Still, he admitted this boom presents a “policy dilemma” for the Fed — productivity is rising, but hiring is not. “We have upside risks to inflation, downside risks to employment,” Powell said. “This is a very difficult thing for a central bank.”Powell said the economy now shows signs of a “K-shape,” where wealthier households and large corporations benefit from AI-driven growth, while lower-income consumers struggle. “Consumers at the lower end are buying less and shifting to lower-cost products,” he said.“There is no risk-free path for policy,” Powell added. “We’re navigating the tension between our employment and inflation goals as carefully as we can.”