AI Employment Crossroads

Welcome to 'Market Pulse,' where we break down the signals shaping our economy. Today, we're talking about a stark warning from the one person, you know, everyone in finance listens to.

Right.

Fed Chair Jerome Powell.

That's right, Alex. And the message was, uh, surprisingly blunt. Powell said that if you look past the headline numbers and adjust for statistical noise...

Hmm.

...quote, 'job creation is pretty close to zero.'

It's a huge statement. It suggests the US labor market is like a car that looks freshly polished but has an engine that's... well, quietly sputtering.

Yeah.

And Powell didn't mince words about the cause.

Right.

Artificial Intelligence.

He said that in conversations with CEOs, the theme is consistent.

Okay.

They are investing heavily in AI, and it's allowing them to do more with fewer people. And we're seeing it in the real world...

Wow.

...Amazon recently cut 14,000 manager roles. A report from Challenger, Gray & Christmas found over 17,000 layoffs this year have been explicitly tied to AI.

This creates what Powell described as a 'very difficult' dilemma for the Fed.

Hmm.

Ben, can you walk us through the two sides of that problem?

Absolutely. So, think of the Fed having to manage two opposing forces.

Okay.

Force number one is a potential inflationary boom. Companies are spending billions on AI infrastructure...

Right.

...you know, data centers, servers, software. This spending grows the economy, but it also risks driving up inflation.

Yeah.

And the normal tool for that is to keep interest rates *high*.

Okay, so that's one side. What's the opposing force?

The opposing force is the very thing we started with.

Right.

The 'Great Freeze' in hiring. The same AI that's fueling that investment boom is also automating tasks and... and eliminating the need for new hires.

Hmm.

Especially in entry-level white-collar jobs. This weakness in the labor market would normally make the Fed want to *cut* interest rates to encourage hiring.

So the tool to fight inflation—high rates—could make the job market even worse.

Exactly.

And the tool to help the job market—low rates—could let inflation run hot.

Right.

They're caught in a policy trap, created entirely by this new wave of technology.

Exactly. And Powell was quick to point out this isn't the dot-com bubble all over again.

Okay.

He said today’s big tech companies 'actually have earnings.' This isn’t just speculative hype...

Right.

...it’s a fundamental change in how our economy operates.

And this change is hitting the newest members of the workforce the hardest.

Yeah.

The article notes that unemployment among recent college grads is topping 5%, and many are choosing to go back to graduate school.

Hmm.

Essentially taking a... a strategic timeout from a dismal job market.

It’s a profound shift. For decades, the assumption was that a growing economy meant growing employment.

Right.

AI is challenging that core economic relationship. The Fed's recent quarter-point rate cut, citing those 'downside risks to employment,' feels less like a solution...

Hmm.

...and more like a nervous first step into uncharted territory.

It leaves us with a difficult question, not just for the Fed, but... but for all of us.

Yeah.

As technology makes our economy more productive, how do we ensure that prosperity is shared broadly?

Now, here's a question we'd like you to think about: If AI can create immense economic value while reducing the need for human jobs, what should be the primary goal of economic policy—maximizing growth or ensuring widespread employment?