Consumer spending and the investments in artificial intelligence (AI) and electrical infrastructure have kept the United States economy strong, and they are expected to continue to do so, Neel Kashkari, president and CEO of the Federal Reserve Bank of Minneapolis, said Wednesday (Jan. 14).
Speaking in a virtual town hall with the Wisconsin Bankers Association, Kashkari said that these trends have kept the economy resilient.
“Inflation is still too high, the labor market seems like it’s gently cooling, but it’s more or less moving sideways,” Kashkari said. “We’ve not seen a lot of layoffs, which is good, but we’ve also not seen a lot of hiring recently. It’s more of a sideways-moving labor market.”
Asked how AI might affect employment, Kashkari said most of the businesses he speaks with are using the technology and have found real use cases but are still in experimentation mode.
So far, he added, companies’ use of AI has not led to layoffs but may have led to a slowdown in hiring.
“I do think businesses are being more cautious about hiring because they think, ‘Hey, we might find some productivity gains, so let’s not go hire a bunch of people we might not need. Let’s keep our workforce more or less as it is as we try to put AI to use,” Kashkari said.
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Asked about the potential impact of the investment in, and deployment of, data centers for AI, Kashkari said local regulators could determine whether the price of energy goes up and who bears the higher costs.
“If AI delivers anywhere near the productivity improvement that the promoters say it will, that’s resoundingly good for the U.S. economy,” Kashkari said. “I mean productivity improvements are what drive standard of living improvements for societies and economic competitiveness. So, we should want this AI to work. We should want it to lead to a boost from U.S. economic competitiveness, but obviously, how it all gets built out, the details do matter for communities.”
The Federal Reserve Bank of New York said in September that while there had been a sharp uptick in AI adoption among companies in its region, only 1% of service firms had cut jobs due to layoffs, and manufacturers had not reduced their workforces at all.
