NY Fed Sees Little Job Fallout From AI

Artificial intelligence (AI) is reshaping hiring decisions in the U.S. labor market, but fears of widespread job loss remain unfounded, according to new regional surveys from the Federal Reserve Bank of New York.

The August regional business surveys found a sharp uptick in AI use among firms in the New York, Northern New Jersey region, with 40% of service firms reported using AI in the past six months, up from 25% this time last year. For the next six months, 44% expect to use AI.

Service firms are those in finance, healthcare, business services, hospitality, retail and other industries outside of manufacturing and the public sector.

Among manufacturers, usage rose from 16% to 26% over the year. For the next six months, 33% expect to use AI. The New York Fed surveys excluded companies that only used AI to search for information.

But instead of expanded AI adoption leading to widespread job losses — OpenAI CEO Sam Altman has said AI could reduce up to 70% of jobs — the New York Fed found that only 1% of service firms have cut jobs due to layoffs, with manufacturers not reducing their workforces at all.

“Layoffs have been almost nonexistent due to AI use,” Richard Deitz, economic policy advisor at the New York Fed, said during a press call Thursday (Sept. 4) to discuss the surveys.

Moreover, manufacturers do not plan to cut jobs as a result of using AI over the next six months. For service firms, 13% plan to reduce their job count in the near future.

The strongest labor impact is on reduced hiring. Among service firms, 12% said they hired fewer people in the past six months due to AI use. For the next six months, 23% of service firms said they would do so. Among manufacturers, none reduced hiring in the last six months but 8% plan to do so in the next half year.

But plans to reduce hiring are offset by increased hiring of workers with AI know-how: 11% of service firms and 7% of manufacturers. For the next six months, 12% and 14% of service firms and manufacturers plan to hire more AI-adept workers, respectively.

Also, workers were more likely to be retrained than let go. A third of service firms and 14% of manufacturers are retraining the existing workforce. For the next six months, 47% of service firms and manufacturers plan to do so.

“When we’re looking at the implied economy-wide impacts from our surveys, these impacts are likely to be really limited,” Deitz said. “For those that have a job, they are actually more likely to be retrained than replaced by an AI, which is a clear positive for workers. Moreover, AI has created job opportunities for workers who are skilled in AI use.”

A PYMNTS Intelligence report had a similar finding: While most workers surveyed agreed that artificial intelligence poses a systemic risk of job displacement, nearly two-thirds do not believe their jobs are at risk. Moreover, a higher percentage of respondents across occupations see AI as augmenting their skills instead of taking away their jobs.

Read more: GenAI: A Generational Look At AI Usage And Attitudes

Job Seekers See More Impact From AI

The biggest impact is on job seekers, where AI “likely made it a bit harder” to get employment now and in the near future, Deitz said. The reduced hiring more often affects workers with a college degree.

Recent Stanford University research supports the finding that AI is making it harder for young workers to get jobs, especially in fields where generative AI tools can automate tasks. These include software developers, receptionists, translators and customer service agents.

The PYMNTS report showed that while 82% of workers who use AI at least weekly say it increases productivity, millennials and Gen Z workers are more likely than older generations to worry that AI can take away their jobs. Overall, 54% are concerned about the technology’s impact on jobs.

In the New York Fed surveys, paid AI services were gaining traction: About half of service firms that use AI reported paying for tools, up 16 percentage points from a year earlier. For manufacturers, 46% of manufacturers do so, up from 7% last year. OpenAI’s ChatGPT, Google’s Gemini, Anthropic’s Claude and Perplexity AI all have free or paid tiers.

The top three uses for AI were the same for both types of businesses, differing only in ranking. For service firms, the top use case is to search for information (54%), followed by marketing and advertising, and business or predictive analytics. For manufacturers, marketing and advertising was at the top (61%), followed by search for information and business or predictive analytics.

The findings suggest AI’s effects on jobs are both overstated and underestimated — overstated in the sense that layoffs remain minimal, but underestimated in that hiring is already shifting in ways that make it harder for new entrants and some college graduates to land positions.

Still, expected job changes will likely be affected by economic conditions. As Deitz noted, last year about 10% of service firms anticipated layoffs, but very few actually occurred. “What firms are anticipating doing with respect to AI is dependent on economic conditions,” he said.

Read also:

Will AI Eventually Replace Human Workers or Augment Them?

Enterprises Embrace AI Assistants to Boost Productivity, Efficiency

Ford, JPMorgan, Amazon Executives Predict Deep Job Cuts as AI Advances

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