Federal Reserve Governor Lisa D. Cook on Monday outlined both the productive potential of artificial intelligence and the labor market disruptions it may bring, saying the technology could materially boost productivity even as it prompts significant changes in how work is organized.
Speaking at the 42nd Annual National Association for Business Economics Economic Policy Conference in Washington, Cook emphasized that AI can speed the generation of ideas by rapidly processing and recombining information. She said the technology makes analytical tools available to a broader set of workers, not only specialists, and argued this diffusion of capability could lift overall productivity.
Cook underscored the scale of occupational change over the long run, noting that 60 percent of today’s occupations did not exist in 1940. She said AI is likely to create new tasks and jobs that are difficult to imagine today, reflecting a pattern of structural change even as it displaces some existing roles.
The Fed governor pointed to signs that the labor market is already undergoing transition. She said demand has fallen for certain occupations, including coders, and that the unemployment rate for recent college graduates has risen in recent years as some employers adopt AI to perform tasks previously assigned to entry-level staff. At the same time, Cook noted that the broader unemployment rate remains relatively low at 4.3 percent and that recent measures of layoffs have stayed subdued.
Cook discussed the implications for monetary policy if AI continues to lift productivity. She said economic growth could remain robust even while churn in the labor market raises unemployment. In that scenario, rising joblessness might not reflect increased slack in the economy, and traditional demand-side policy responses could prove ineffective at addressing dislocation caused by AI without pushing up inflation. That dynamic, Cook said, would force policymakers to weigh tradeoffs between unemployment and inflation.
Given those tradeoffs, Cook argued that education and workforce policies may be better placed than monetary policy to manage the transition, suggesting non-monetary interventions could more directly target the dislocation that AI creates.
Cook also highlighted a notable business response to AI: robust investment in data centers and semiconductor capacity. She said such spending is accelerating despite elevated interest rates, which suggests the current neutral rate of interest could be higher than before the pandemic. However, she cautioned that this picture could change once AI-related productivity gains are fully realized or if the labor market transition contributes to rising income inequality.