Federal Reserve Chair Jerome Powell drew a stark picture of a labor market that looks fine on the surface\u20144.3% unemployment, solid consumer spending\u2014but 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, \u201cjob creation is pretty close to zero.\u201d<\/p>\n
He noted \u201ca significant number of companies\u201d have recently announced layoffs or hiring pauses, with many of them explicitly citing AI as the reason.<\/p>\n
\u201cMuch of the time they\u2019re talking about AI and what it can do,\u201d Powell told reporters after the Fed\u2019s rate-cut decision, warning large employers are signaling they won\u2019t need to add headcount for years. \u201cWe\u2019re watching that very carefully,\u201d he added.<\/p>\n
The comments come as the Fed cut interest rates by a quarter point to a range of 3.75%\u20134%, citing \u201cdownside risks to employment\u201d even as inflation remains elevated. Powell said the U.S. economy is still expanding at a \u201cmoderate pace,\u201d even as hiring slows. He described that spending as one of the \u201cbig sources of growth in the economy,\u201d driven by companies building data centers and other equipment tied to artificial intelligence.<\/p>\n
Powell also pushed back on the idea that all that spending is amounting to another speculative bubble. He drew a clear line <\/a>between today\u2019s surge in capital expenditure and the dot-com era, noting \u201cthese companies actually have earnings.\u201d\u00a0 Those projects, he said, aren\u2019t especially sensitive to interest rates, though, since they reflect long-term bets on higher productivity.<\/p>\n At the same time, Powell emphasized the boom creates a policy dilemma for the Fed. AI and automation are boosting output, but they\u2019re also allowing companies to do more with fewer workers, leaving the labor market softer, even while GDP stays positive.<\/p>\n \u201cWe have upside risks to inflation, downside risks to employment,\u201d he said. \u201cThis is a very difficult thing for a central bank, because one of those calls for rates to be lower, one calls for rates to be higher.\u201d<\/p>\n A bifurcated market<\/p>\n Recent corporate announcements illustrate Powell\u2019s warning. Amazon<\/a> announced this week it laid off 14,000 middle managers\u2014about 4% of its white-collar workforcein an effort to \u201cremove organizational layers.\u201d The layoffs come amid their rampant investments<\/a> into AI.\u00a0 Target<\/a>, Paramount, and other large firms followed with their own cuts.<\/p>\n According to a Challenger, Gray & Christmas report<\/a>, U.S. employers have announced nearly 946,000 layoffs so far this year\u2014the highest total since 2020\u2014with more than 17,000 explicitly tied to AI and another 20,000 to automation.<\/p>\n \u201cJob creation is very low, and the job-finding rate for people who are unemployed is very low,\u201d Powell said.<\/p>\n The phenomenon is so widespread some economists have coined a new term\u2014the \u201cGreat Freeze<\/a>\u201d\u2014to describe the dismal labor market conditions. With unemployment among recent college grads topping 5%\u2014and AI threatening to automate entry-level office jobs<\/a>\u2014many Gen Z workers are turning to graduate school <\/a>as a strategic timeout.\u00a0<\/p>\n That awkward balance\u2014strong investment but weak hiring\u2014 is now at the center of the Fed\u2019s decision-making. Powell said the economy increasingly resembles a K-shape,<\/a> with higher-income households and large corporations benefiting from strong stock markets and AI-fueled productivity gains, while lower-income consumers pull back<\/a> under the weight of rising costs.\u00a0<\/p>\n He pointed to anecdotal reports from major retailers and consumer companies describing a \u201cbifurcated economy,\u201d in which wealthier Americans continue to spend freely but those at the bottom are trading down to cheaper goods. \u201c<\/p>\n \u201cConsumers at the lower end are struggling and buying less and shifting to lower-cost products,\u201d Powell said, noting the uneven effects of growth make the Fed\u2019s balancing act even more complicated.<\/p>\n \u201cThere is no risk-free path for policy,\u201d Powell said. \u201cWe\u2019re navigating the tension between our employment and inflation goals as carefully as we can.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Federal Reserve Chair Jerome Powell drew a stark picture of a labor market that looks fine on the…\n","protected":false},"author":2,"featured_media":113533,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[218,72,9921,113,7457,1961,2945,61,1095,5232,60,3162,150,2237],"class_list":["post-113532","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-artificial-intelligence","tag-business","tag-consumer-spending","tag-economy","tag-fed-interest-rates","tag-federal-reserve","tag-gen-z","tag-ie","tag-inflation","tag-interest-rates","tag-ireland","tag-jerome-powell","tag-jobs","tag-unemployment"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/113532","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=113532"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/113532\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/113533"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=113532"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=113532"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=113532"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}