AI potential contributor to alarming joblessness statistics, according to Federal Reserve Chairman Powell
In a series of recent developments, the impact of artificial intelligence (AI) on the labor market has become a topic of growing concern for policymakers, economists, and businesses alike.
Earlier this summer, Ford CEO Jim Farley predicted that AI could replace "literally half of all white-collar workers in the U.S." This prediction comes as the Federal Reserve Board is grappling with a weak labor market, particularly for young graduates. According to a report by the New York Fed, the labor market for 22 to 27-year-olds had deteriorated noticeably in the first quarter of 2025.
The latest jobs report further underscores this trend, showing that U.S. employers only added 22,000 jobs in August – the worst August report since the pandemic. This slowing in hiring has been a concern for many, including Shopify CEO Tobias Lütke, who instructed hiring managers to explain why AI couldn't do a job before hiring human workers.
Meanwhile, online freelancer marketplace Fiverr announced its transition to an "AI-first company" on Wednesday, a move that resulted in the layoff of about 250 full-time staff members. This shift towards AI is not unique to Fiverr, as institutions such as Bitkom, a leading digital association in Germany, and research bodies like Stanford University have recently addressed the impact of AI on labor market developments.
These entities have highlighted both potential job reductions and the creation of new roles, as well as the need for workforce upskilling and digital competence enhancement. A Stanford study from August found that early-career workers aged 22 to 25 in the most AI-exposed jobs experienced more relative decline in employment than other categories.
The concern over the impact of AI on the labor market has prompted a group of more than 40 leading economists to sign an open letter to Labor Secretary Lori Chavez-DeRemer in early September, making data collection on AI's impact on the labor markets a top priority.
Fed Chair Jerome Powell has acknowledged the potential role of AI in the current trend, particularly for young graduates. However, he believes that the Federal Reserve does not have the tools to address the social issues and labor market issues that will arise from AI.
Cornell University associate professor John McCarthy expressed his concern in July that the early AI transition could lead to a "lost generation" of graduates unless policy, education, and hiring norms adjust. As the AI revolution continues to shape the future of employment, these concerns are likely to persist, and efforts to mitigate their impact will continue to be a focus for policymakers, businesses, and academia.
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