Atlanta Federal Reserve President Raphael Bostic said Tuesday that the United States may be moving toward a new, higher structural level of unemployment that the Fed might not be able to offset through its usual policy tools.
Bostic framed this possibility as a structural shift in the labor market rather than a temporary fluctuation. He cautioned that if such a structural rise in unemployment materializes, the central bank’s capacity to reverse it could be limited.
On the subject of governance, Bostic voiced optimism that the safeguards protecting the Federal Reserve’s independence will continue to hold as the institution navigates potential leadership changes. He noted that any incoming Fed chair will need to spend time establishing working relationships with both staff and fellow policymakers within the central bank.
Discussing the nomination of Kevin Warsh to be Fed chair, Bostic said it is not yet possible to predict how Warsh would react to pressure from President Trump. Reflecting the uncertainty around that dynamic, Bostic observed that the Fed "won't know until we know" how the nominee might handle such situations.
Bostic also highlighted artificial intelligence as a complicating factor for the Fed’s economic analysis. He said the transition to AI could be particularly challenging for the central bank to fully comprehend as it unfolds, creating a risk that the Fed might misread or lag behind important shifts in the economy driven by AI adoption.
Despite these concerns, Bostic emphasized that the Fed has continued to focus on measurable economic outcomes across different demographic and economic groups. He said this disaggregated data remains important in determining where slack in the labor market exists and in assessing the underlying conditions of employment.
Taken together, Bostic’s remarks signal a cautious outlook: while institutional protections and data-driven analysis remain in place, the Fed faces structural, technological, and governance-related uncertainties that could constrain its ability to influence employment outcomes.