Fed's Kashkari says AI is causing a hiring slowdown in big companies

• AI's impact on hiring is primarily a 'big company story' rather than affecting smaller businesses, according to Kashkari
• Companies that were skeptical two years ago are now actively using AI and reporting actual productivity gains from their investments
• Kashkari anticipates a continued pattern of low hiring and low firing in the labor market as businesses integrate AI technology

Summary

Minneapolis Federal Reserve President Neel Kashkari stated Monday that artificial intelligence is driving a hiring slowdown among large U.S. companies, with many businesses experiencing "real productivity gains" from the technology.

Key Developments:

Kashkari noted that AI's impact on hiring is primarily a "big company story," with larger firms reporting changed hiring plans due to AI implementation. He anticipates continued low hiring and low firing trends in the labor market, though smaller companies remain less affected by this trend.

Market Context:

Since OpenAI launched ChatGPT in 2022, U.S. companies have invested billions of dollars in AI technology to enhance employee capabilities and operational efficiency. While initial skepticism existed two years ago, Kashkari reports businesses are now confirming actual productivity improvements from AI deployment.

Policy Implications:

The Fed President indicated the central bank is "pretty close to neutral right now" regarding monetary policy. Despite acknowledging some "mis-investment or mal-investment" in AI, Kashkari emphasized that substantial anecdotal evidence supports genuine business value from the technology.

Labor Market Outlook:

The AI-driven hiring slowdown represents a shift in labor market dynamics, with companies prioritizing technology investments over headcount expansion. However, this trend appears concentrated among larger enterprises rather than affecting the broader economy uniformly.

Kashkari's comments highlight growing concerns about AI's impact on job security and employment patterns, even as businesses realize efficiency gains. The trend suggests a potential structural change in corporate hiring practices as AI adoption accelerates across major companies.