Federal Reserve Governor Michael S. Barr issued a stark warning on Tuesday concerning the potential trajectory of synthetic intelligence, outlining a state of affairs the place speedy technological development will create a “jobless boom” that leaves a good portion of the inhabitants “essentially unemployable.”
Talking earlier than the New York Affiliation for Enterprise Economics on Feb. 17, Barr mentioned the profound uncertainty surrounding how generative AI will reshape the labor market. Whereas present information suggests a gradual integration of the know-how, Barr urged policymakers to not underestimate the dangers. “We should be clear-eyed about how painful these changes could be for affected workers and how challenging it would be for the government and the private sector to successfully manage the fallout.”
He laid out three eventualities for a way AI will impression the labor market, noting that predictions vary from “the utopian to the apocalyptic.” The tempo of technological change—and the ensuing debate—is evolving shortly, although.
In detailing what he termed a “scenario of rapid growth,” Barr described a future the place AI brokers substitute a variety {of professional} and repair occupations, whereas robotics automate manufacturing and transportation. On this model of the economic system, labor demand would focus in a number of extremely expert trades or roles requiring human interplay, whereas capital holders and “AI superstars” seize the lion’s share of financial progress.
“Layoffs soar, leading to widespread unemployment in the short run and declines in labor force participation over time, as a large share of the population is essentially unemployable,” Barr mentioned. He added that such a future would require, amongst different issues, a whole rethinking of workforce improvement and the social security web to stop features from being concentrated amongst a small elite.
Present indicators within the noise
Barr cautioned that this dystopian final result is simply one of many three possible eventualities that he sees forward. He emphasised that, thus far, the financial information is extra in keeping with a “gradual adoption” state of affairs, akin to the mixing of the web or electrical energy. (Federal Reserve researchers theorized final yr that AI would extra intently resemble the sunshine bulb than some other know-how.) On this view, whereas some jobs are displaced, productiveness features ultimately enhance actual wages and create new industries.
Nonetheless, Barr cautioned that early warning indicators are already seen. He highlighted analysis exhibiting that younger individuals and early-career employees in AI-exposed fields—akin to software program improvement and customer support—are already seeing declines in employment relative to different sectors. (Fortune has termed this “the Gen Z hiring nightmare.”) Barr famous, “For these workers, the short run may have long-term consequences,” citing the persistent earnings injury attributable to getting into a weak labor market.
A fragile financial steadiness
The governor’s feedback come at a fragile second for the U.S. economic system. As of February 2026, inflation stays elevated at 3%, pushed partly by tariffs, whereas job creation has been “near zero” over the course of the earlier yr. Barr described the present labor market as stabilizing however sustaining a “delicate balance” that’s weak to destructive shocks. Goldman Sachs economists used almost the identical actual language a day earlier, as they projected that unemployment was holding regular regardless of weak job progress owing to just about 800,000 immigrants leaving the workforce in 2026.
Given these situations, Barr signaled that the Federal Reserve is unlikely to decrease rates of interest quickly. He defined that if AI drives a productiveness growth, it could improve demand for capital and funding, placing upward strain on the “neutral” rate of interest. Moreover, the large infrastructure build-out required for AI—together with information facilities and vitality grids—might show inflationary within the quick time period.
Making ready for disruption
Barr additionally outlined a 3rd “stalled growth” state of affairs, the place vitality shortages or an absence of coaching information trigger the AI growth to bust, resulting in monetary stress corresponding to the dotcom crash or the railroad panic of the nineteenth century.
No matter which state of affairs performs out, Barr concluded that the personal and public sectors are at the moment ill-equipped to deal with the potential pace of the transition. He warned that the “historical record on meaningful efforts to help workers in such a transition is not encouraging.”
“Society will need to be nimble and bold to reduce the pain of short-term dislocations,” Barr mentioned. “Widespread AI adoption will very likely lead to dramatic and sometimes difficult changes in the way many of us work and live.”
