Skip to content
Welcome, thoughtbot's Giant Robots listeners!Start here
AI: Jobs, Power & Money
21SEP

New York Fed: adoption up, sackings rare

3 min read
16:45UTC

Service-firm AI use jumped from 25% to 40% in a year, yet the same firms told the New York Fed they are barely firing anyone. What they are doing is not hiring graduates.

EconomicDeveloping
Key takeaway

Firms are adopting AI and not firing, but graduates are the ones no longer being hired.

The Federal Reserve Bank of New York published firm-level survey work on 5 August finding that AI use among service firms in its district rose from 25% in August 2024 to 40% a year later, while those same firms reported very few AI-driven layoffs and said they intend to retrain staff rather than dismiss them.⁠1 The regional Fed banks run these surveys of local employers every month, which makes them one of the few instruments that asks companies directly rather than inferring from filings or announcements.

What the survey does find is hiring suppression aimed at college-educated applicants. That is a different mechanism from redundancy and it leaves a different trace: no notice, no severance, no filing, no press release, just a vacancy that never opens. SAP chief executive Christian Klein told investors in July that the company's research headcount will not grow for a year, which is the same decision described from the employer's side.

Stanford's Digital Economy Lab put the ratio at roughly 34 suppressed hires for every declared AI layoff. Federal Reserve governor Michael Barr said in July that the central bank had found little evidence of economy-wide displacement. Both statements survive the New York Fed's result intact, because an adjustment that runs through unopened vacancies will not show up in dismissal counts and will not move an aggregate unemployment rate quickly.

The reading matters for how the rest of the evidence on this beat should be weighed. A survey of firms sees intentions and dismissals; a pension register sees entries and exits. Where the two disagree about severity, the gap is likely to be sitting in the cohort that was never hired in the first place, and no instrument in wide use counts that group directly.

Deep Analysis

In plain English

The Federal Reserve Bank of New York surveys service-sector firms about how they use technology. It found firms said they were adopting AI tools quickly, but very few said they were actually laying staff off because of it. Instead, the effect showed up mostly in hiring: firms became more cautious about bringing in new graduates and other college-educated applicants, even while keeping existing staff on.

Deep Analysis
Root Causes

AI tools that automate first-draft writing, research summarisation and junior analytical tasks substitute most directly for exactly the tasks new graduates are hired to do, rather than for the judgement-based work of experienced staff, so hiring suppression concentrating on the college-educated may reflect which tasks AI reaches, not a preference for non-graduate labour generally.

Firms facing uncertain AI-driven productivity gains have an incentive to hold headcount steady rather than announce layoffs that would be read as an admission the technology already works, making 'adoption up, redundancies rare' a plausible near-term equilibrium even where hiring plans have already been cut.

What could happen next?
  • Meaning

    AI's near-term labour effect in US services is showing up as a hiring slowdown for graduates rather than as visible layoffs.

  • Consequence

    A slowdown concentrated in hiring rather than firing will not appear in headline layoff trackers such as Challenger, Gray & Christmas, understating the effect if hiring suppression is the dominant channel.

First Reported In

Update #19 · Four methods, one answer on AI and jobs

Federal Reserve Bank of New York· 24 Aug 2026
Read original →
Different Perspectives
Korea's four largest banks, as reported by News1
Korea's four largest banks, as reported by News1
KB Kookmin, Shinhan, Hana and Woori rehired 1,013 retirees last year, equal to 79.1% of their graduate intake, according to News1. Graduates face a smaller entry intake while returners take fixed-term credit-screening roles at lower pay, News1 reports.
High Court of Justice of Madrid
High Court of Justice of Madrid
The court's employment chamber ruled in judgment 864/2026, dated 8 October and made public in early November, that introducing AI is not on its own a ground for dismissal. Employers must prove AI's effect through the four causes the Workers' Statute already lists.
Singapore Ministry of Manpower
Singapore Ministry of Manpower
The Singapore Ministry of Manpower put third-quarter retrenchments at 4,800, concentrated in information and communications, financial services and manufacturing, with business reorganisation the main driver. Its release does not mention AI.
Challenger, Gray & Christmas
Challenger, Gray & Christmas
Challenger reported on 5 November that market and economic conditions overtook AI as the leading stated reason for 2026's US job cuts, at 130,531 against 121,401. AI was cited for 1,265 cuts in October, its lowest month of the year.
Office for Budget Responsibility
Office for Budget Responsibility
The OBR's 28 October outlook showed output per worker in information and communication growing 7.6% a year, yet kept AI's boost to UK productivity at 0.2 percentage points a year. It does not attribute the faster growth to AI.
Central Bank of Ireland
Central Bank of Ireland
Governor Gabriel Makhlouf said on 2 November that AI investment has supported Irish activity and flagged the debt financing behind it as a financial-stability risk. On jobs, he named skills bottlenecks and mismatches, not job losses.

Written with AI from Lowdown's published reporting. Not individually reviewed by an editor. Editorial standards.