Fed finds AI isn’t rapidly replacing jobs yet, even as more firms adopt it

Companies are adopting artificial intelligence into their workflow more, but haven’t gone as far as to let the tech greatly influence layoffs — yet. 

Service firms nearly doubled their AI usage this year compared to the same time last year, with 40% saying they're utilizing the tech compared to 25% last year. Manufacturers also saw a jump in usage, with 26% saying they’ve adopted the tech compared to 16% last year, according to an analysis of August business surveys from the Federal Reserve Bank of New York released Thursday. The surveys asked companies in the New York-Northern New Jersey area if they used AI in their business in the past six months and if they will use it in the next six months. 

Within service firms that use AI, 13% expect the tech to influence layoffs over the next six months. However, about the same amount of service firms said they anticipated AI-induced layoffs in last year’s survey, but just 1% of service firms reported laying off employees because of AI over the last six months, the analysis found. 

Within manufacturing firms, none reported AI-induced layoffs this year or the year prior and said they don’t anticipate any over the next six months. 

“Looking ahead, however, layoffs and reductions in hiring plans due to AI use are expected to increase, especially for workers with a college degree,” the report said.

Instead of laying off already employed workers, firms are more likely to retrain them on AI, with nearly half of both service and manufacturing firms planning to retrain workers on the tech in the next six months. 

While this may give workers some temporary protection, the same can’t be said for job seekers.

Some firms surveyed said that they’re either “scaling back” hiring due to AI or recruiting individuals proficient in the tech, the report said.

A new report from ADP found that only 54,000 jobs were added to the private sector in August and a recent report from the Bureau of Labor Statistics found that the number of unemployed people surpassed the number of job openings in July. As the job market continues its significant slow down, this industry change could place another barrier in front of job seekers.

About 12% of service firms that use AI said they hired fewer workers in the last six months while a quarter of firms that are planning to use AI in the next six months plan to hire fewer due to the tech. The analysis said that the pullback in hiring was focused on jobs that require college degrees. 

While manufacturing firms that use AI didn’t cut back on hiring based on its implementation in the past, nearly 10% anticipate cutting back for this reason in the next six months. 

On the other hand, 11% of service firms and 7% of manufacturers hired workers thanks to AI in the last six months, and 10-15% in both industries reported plans to hire more in the next six months. The analysis said that — “although not common” — some of the firms that reported layoffs or hiring reductions were also among those that actually hired new workers.