Fed Chair Powell blames AI for widespread job losses and hiring freezes

Federal Reserve Chair Jerome Powell expressed deep concerns about artificial intelligence’s impact on employment, citing AI as a primary driver behind widespread corporate layoffs and hiring freezes. Powell’s remarks came during Wednesday’s Federal Open Market Committee meeting, where he described job creation as “pretty close to zero” and noted that unemployment and inflation are rising simultaneously—an unusual economic phenomenon that’s creating significant challenges for policymakers.

What Powell is saying: The Fed chair directly linked AI adoption to deteriorating job market conditions across major corporations.

• “Job creation is very low, and the job-finding rate for people who are unemployed is very low,” Powell told reporters after the FOMC meeting.
• “Much of the time they’re talking about AI and what it can do,” he said about conversations with corporate executives regarding their workforce decisions.
• Powell emphasized that the Fed is “watching that very carefully” as companies increasingly cite AI capabilities when justifying layoffs or hiring pauses.

The economic paradox: The current situation defies traditional economic patterns, where employment and inflation typically move in opposite directions.

• Both unemployment and inflation are rising simultaneously in 2025, creating an “impossible situation” for the Federal Reserve.
• The Fed responded by cutting interest rates to 3.75-4.0 percent, the lowest level in three years.
• This dual pressure is placing increased burden on working-class households while the Fed struggles to balance competing economic forces.

Why this matters: The AI-driven job displacement is creating a two-tiered economy with stark wealth disparities.

• Rising unemployment allows corporations to suppress wages for remaining workers due to increased labor market competition.
• “Consumers at the lower end are struggling and buying less and shifting to lower-cost products,” Powell observed.
• Meanwhile, high-income households and corporations are benefiting from “the strongest stock market in history.”

The bigger picture: Powell’s comments highlight how AI adoption is translating into real economic consequences for American workers.

• A “significant number of companies” are actively reducing their workforce or halting new hiring specifically due to AI capabilities.
• The economic effect creates a cycle where “the rich spend like sailors, while the poor get much poorer.”
• This AI-driven job market disruption is occurring faster than traditional economic models anticipated, forcing policymakers to confront unprecedented challenges.