Arya News - The chairman of the Federal Reserve has suggested America’s artificial intelligence (AI) boom could destroy more jobs than it creates.
The chairman of the Federal Reserve has suggested America’s artificial intelligence (AI) boom could destroy more jobs than it creates.
Jerome Powell said it was impossible to ignore the fact that companies were citing AI in recent lay-off announcements , and said the technology could drive improved growth and productivity “without more job creation”.
The central banker said: “In past really significant technology innovation eras, you have seen some jobs destroyed and other jobs made.
“Ultimately, what’s happened for a couple of hundred years is that when you get through all that, you have higher productivity, and you have new jobs, and there are enough jobs for people. This may be different.”
The warning came as the Federal Reserve cut interest rates to a three-year low of 3.75pc, down from 4pc, in response to fears about rising unemployment and a slowdown in the jobs market. The vote was divided, with three members of the Federal Open Market Committee (FOMC) voting against the chairman.
Mr Powell said that he thought the US jobs market was shrinking, in contrast to the official data. According to the Bureau of Labour Statistics, the US economy has added 40,000 new positions per month on average since April.
The Fed chief said: “We think there’s an overstatement in these numbers, by about 60,000, so that would be negative 20,000 per month.”
Mr Powell said that the adoption of artificial intelligence was “probably part of the story but not a big part of the story” in recent major lay-off announcements from companies including Amazon, which began cutting 14,000 employees in October.
Donald Trump is already interviewing candidates to replace Jerome Powell when he steps down as Fed chairman in May - Seth Wenig/AP
Yet the Fed raised growth forecasts even as the central bank lowered rates and warned on jobs. It upgraded its forecasts for US GDP growth this year from 1.6pc to 1.7pc, and from 1.8pc to 2.3pc in 2026. Mr Powell said higher productivity, in part driven by AI advancements, was behind the upgrade.
It maintained its forecast that unemployment will rise to 4.5pc this year, up from 4.4pc as of the latest September figures, and then dip only to 4.4pc in 2026.
America’s current high levels of productivity growth, which has been climbing at a pace of around 2pc for five or six years, are probably not yet a reflection of AI adoption but may reflect other kinds of automation, Mr Powell said.
“The pandemic may have induced people to do more automation and do more things with computers to replace people and that raises productivity, you know output per hour,” he added.
How seriously to take the weakening jobs market was a key point of contention in the Fed’s vote on interest rates, which saw three FOMC members dissent from Mr Powell.
Governor Stephen Miran, who was appointed to the board by Donald Trump after Adriana Kugler stepped down early from her position in August, voted for a larger 0.5 percentage point cut.
Austan Goolsbee, president of the Chicago Fed, and Jeffrey Schmid, president of the Kansas City Fed, voted for no change.
Mr Powell said: “Everyone around the table at the FOMC agrees that inflation is too high and we want it to come down, and agrees that the labour market has softened and that there’s further risk. Everyone agrees on that. Where the difference is, is how do you weight those risks?”
The FOMC maintained its view that there would be only one interest rate cut in 2026.
Mr Trump has heaped pressure on the Fed to slash interest rates this year, which he said should be cut to 1pc, calling Mr Powell a “numbskull” and “Mr Too Late”. The US president is also trying to sack Lisa Cook, the Fed governor.
Mr Trump is in the process of conducting the final interviews with candidates to replace Mr Powell as Fed chairman when his term ends in May.
On Wednesday, Mr Trump was due to interview Kevin Warsh, a former Fed governor. Kevin Hassett, the National Economic Council director, who is a close ally of Mr Trump and has been a loud advocate of cutting interest rates, is considered the favourite for the job.
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