"Disruption comes before manpower, economic benefits take time"! The Federal Reserve speaks the truth: AI is about to impact the job market.

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The profound impact of AI on the economy is moving from theory to reality, and its shock to the job market may precede the realization of productivity dividends. This is the latest clear signal from Federal Reserve officials!

Federal Reserve officials have rarely admitted that AI is reshaping the job market, and technological unemployment has already begun to emerge. Richmond Fed President Thomas Barkin recently stated that AI is being adopted more rapidly in call centers and programming positions, and corporate executives report a surge in the number of applicants for each vacancy. Federal Reserve Governor Christopher Waller further pointed out that a recent Stanford University study shows the number of jobs in occupations most affected by AI has dropped by about 13%, mainly concentrated in support and administrative roles.

These statements are corroborated by the latest Fed Beige Book report. The report shows that more employers are reducing their workforce through layoffs and natural attrition, with some companies explicitly attributing this to increased investment in AI technology. Retailers, in particular, are cutting call center and IT-related positions, and several companies said they may further lay off employees next year.

However, Fed officials also emphasized that the benefits brought by technological disruption have a time lag. Morgan Stanley analysts predict that AI's substantive impact on economic data will not appear until the end of this decade and the next. Goldman Sachs said that current AI adoption across the United States is only 9.2%.

Cracks Emerge in the Job Market

The Federal Reserve's Beige Book report recorded subtle changes in the labor market. In most districts, more employers reported reducing staff through layoffs and natural attrition, citing reasons such as weak demand, high economic uncertainty, and, in some cases, increased investment in artificial intelligence technology.

In a speech at the Aiken Chamber of Commerce in South Carolina, Barkin observed a marked shift in hiring dynamics. He noted that corporate executives reported a surge in applicants for each vacancy, coinciding with the accelerated adoption of AI in call centers and programming positions.

The Stanford study cited by Waller provided quantitative evidence. Employment in occupations most impacted by AI fell by about 13% compared to less-affected occupations, with these reductions mainly occurring in support and administrative roles—areas typically automated first. He stated:

This early impact is consistent with what he has learned from corporate contacts. Retailers, in particular, are cutting employment in call center and IT-related roles, with most companies currently relying on natural attrition, but several retailers indicated they might lay off staff next year.

AI Reshapes Hiring But Has Not Yet Triggered a Layoff Wave

A survey by the New York Fed shows that few companies report layoffs caused by AI. Instead, they are using technology to retrain employees. However, AI is affecting hiring at these companies; some are shrinking their recruitment because of AI, while others are increasing hires who are proficient in AI use.

Looking ahead, layoffs and cutbacks in hiring caused by AI are expected to increase, especially for employees with college degrees. This trend shows that AI's impact on the labor market is spreading from low-skill to high-skill jobs.

Barkin also mentioned changes in consumer spending patterns. "Although consumers are still spending, it's no longer 2022. Consumers are not as affluent, and they are making choices." He added that demand among high-income people remains strong.

Economic Benefits Will Take Time to Appear

In a speech at Washington Fintech Week, Waller elaborated on the timing inconsistency of technological innovation. Disruption from innovation comes first, but benefits take time. When new technology emerges, it's always easier to see the jobs that may disappear but difficult to see those that will be created.

He used the automobile industry as an example, explaining that when the car was invented, it was easy to see that jobs for saddle makers would disappear, but less obvious that saddle makers’ skills could be used to make car seats, and that more productive car manufacturing would create more and better-paid jobs.

Waller emphasized that the U.S. capital stock (measured at constant prices) is seven times what it was in 1950, yet the unemployment rate was 4.4% in September 1950 and 4.3% in August 2025. This is why economists are usually technological optimists—history has repeatedly shown that adopting new technology leads to economic growth and more, not fewer, jobs.

Waller pointed out that companies are using AI to improve productivity, which allows for greater output with the same level of input. These gains are included in GDP and the corresponding national income.

He said that in the U.S., a common characteristic of major technological innovations is that competition quickly drives down costs and leads to rapid and widespread adoption. If hardware and software innovation continue to lower AI costs, then he believes there is almost no barrier to AI’s continued spread across the economy.

According to a recent Goldman Sachs report, current AI adoption across the entire economy is about 9.2%, while skeptics like Elliott Management say the current AI cycle is "overhyped."

Morgan Stanley analyst Stephen Byrd said, "Although AI may be adopted faster than previous technologies, we think it’s still too early to see its impact in economic data, except for corporate investment." He predicts that the impact of AI will not appear in economic data until the end of this decade or the next.

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