Fed Chair Jerome Powell warns that the U.S. labor market’s apparent stability hides a chilling truth — AI-driven layoffs and automation are pushing job creation to near zero.
In a sobering assessment that shook Wall Street and Main Street alike, Federal Reserve Chair Jerome Powell warned that America’s job market, though outwardly stable, is quietly stalling beneath the surface — with artificial intelligence now reshaping the workforce faster than policy can keep up.
Speaking at a post–FOMC press conference on Wednesday, Powell revealed that once “statistical overcounting” is adjusted for, U.S. job creation is “pretty close to zero.” The culprit, he said, isn’t just economic cooling — it’s AI.
“A significant number of companies are saying outright they won’t need to hire for years — because AI allows them to do more with fewer people,” Powell said gravely.
His remarks followed the Fed’s decision to cut interest rates by a quarter point to a range of 3.75%–4%, citing “downside risks to employment” even as inflation remains stubbornly high.
Powell painted a complex picture of an economy still expanding — largely fueled by massive AI-related capital spending — but increasingly two-tiered and uneven.
“We have upside risks to inflation, downside risks to employment,” he warned. “This is a very difficult thing for a central bank.”
The Great Freeze: AI’s Human Cost
Recent data support Powell’s bleak tone. According to Challenger, Gray & Christmas, U.S. companies have announced 946,000 layoffs this year — the highest since the pandemic — with over 37,000 jobs directly tied to AI and automation.
Amazon led the wave this week, slashing 14,000 white-collar positions to “remove organizational layers” amid skyrocketing AI investments. Target, Paramount, and other corporate giants followed suit, signaling a chilling trend across sectors.
Economists are calling it “The Great Freeze” — a labor market frozen by automation, where growth in output no longer translates to growth in jobs. Unemployment among new college graduates has already climbed above 5%, with thousands of Gen Z workers opting for graduate school rather than face a job market being rewritten by algorithms.
A K-Shaped Divide
Powell also described a “bifurcated economy,” where prosperity is increasingly concentrated among high-income earners and corporations profiting from the AI revolution, while working-class and lower-income Americans struggle with rising costs and shrinking opportunities.
“Consumers at the lower end are struggling,” Powell said. “They’re buying less, trading down to cheaper products. Meanwhile, higher-income households are still spending freely.”
That divide, he noted, complicates the Fed’s already delicate balancing act — how to curb inflation without crushing the job market in an era where technology itself is doing the cutting.
AI Boom or Human Bust?
Despite the bleak labor outlook, Powell pushed back against comparisons to the dot-com bubble, insisting that today’s AI-driven investments are underpinned by real earnings and productivity — not speculation.
But for millions of workers, that “productivity” translates into layoffs, not raises. The Fed now faces a paradox: AI is powering growth while undermining the very employment base it seeks to protect.
As Powell concluded, his words carried the weight of a new economic reality:
“There is no risk-free path for policy. We’re navigating the tension between our employment and inflation goals as carefully as we can.”
For America’s workers, however, the message was unmistakable — the age of automation is here, and it’s already rewriting the rules of the labor market.
