NY Fed: businesses use AI to transform work, not cut jobs

The Federal Reserve Bank of New York says the businesses in its region are using AI to reshape how work gets done, not to shed headcount. That is the read from a Liberty Street Economics post published September 1, drawing on the bank's August surveys of firms in New York and Northern New Jersey. It is a regional snapshot, not a national employment print, so weigh it as one signal rather than a verdict on the whole economy.

Adoption is up, spending is still light

More than 60% of service firms (61%) and about half of manufacturers (51%) now report using AI, up from 40% and 26% a year ago, and from 25% and 16% back in 2024. But the money behind that is modest: about three-quarters of service firms and more than 90% of manufacturers describe their AI investment as minimal to modest. This is broad experimentation on small budgets, not a capital-spending wave yet.

The layoff number is small

The figure that matters for the labor-cost story stays low. Only 4% of service firms said they laid off any workers because of AI in the past six months, up from 1% a year earlier, and no manufacturers reported AI-driven layoffs in either year. Among firms that use AI, the median share of workers actually touching it is 17% in services and 7% in manufacturing, so even at adopters this is a tool in a minority of hands.

Where the adjustment shows up

The response is landing in hiring plans and training budgets rather than pink slips. About 15% of service firms said they hired fewer people than they otherwise would have because of AI, while about 13% hired more to help put AI to work, close to a wash. The most common move was retraining: just over a third of service-sector AI users and more than a fifth of manufacturing AI users are reskilling existing staff instead of replacing them.

The caveats are worth holding. This is a self-reported regional sample, the authors count AI use only when it goes beyond pure information search, and they note the picture could shift as adoption matures, with separate research pointing to tougher conditions for entry-level workers. So the "transform, not cut" headline describes today's regional firms, not a promise about where national payrolls head next.

For investors reading AI through the labor line, the takeaway is that displacement is not yet the story in this data; the cost is going into pilots and retraining, which squares with the modest time-savings numbers from FRED research and sits apart from the heavy-capex names like Alibaba, where AI spending drove a 75% profit drop. Watch the next survey round for whether that 4% layoff figure climbs as budgets scale, because that, not this quarter's adoption jump, is the line that would signal AI finally reaching the wage bill.