"Federal Reserve Chair Jerome Powell drew a stark picture of a labor market that looks fine on the surface-4.3% unemployment, solid consumer spending-but is quietly losing momentum underneath. Once you adjust for statistical overcounting in the payroll data, he said during a press conference Wednesday following the FOMC meeting, "job creation is pretty close to zero." He connected that slowdown, at least in part, to what CEOs are now openly telling investors: AI allows them to do more with fewer people."
"The comments come as the Fed cut interest rates by a quarter point to a range of 3.75%-4%, citing "downside risks to employment" even as inflation remains elevated. Powell said the U.S. economy is still expanding at a "moderate pace," even as hiring slows. He described that spending as one of the "big sources of growth in the economy," driven by companies building data centers and other equipment tied to artificial intelligence."
Headline unemployment is 4.3% and consumer spending remains solid, but adjusted payroll measures indicate job creation is nearly zero. Many companies have announced layoffs or hiring pauses, often citing artificial intelligence as a reason and indicating they will not need additional headcount for years. The Federal Reserve cut rates by 25 basis points to 3.75%–4% while citing downside risks to employment and persistent inflation. AI-driven capital spending on data centers and equipment is a major growth source and reflects long-term productivity bets that are less sensitive to interest rates. The mix of automation-driven output gains and weaker hiring creates a policy dilemma for the Fed.
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