Jason R. Abel, Richard Deitz, Natalia Emmanuel, Ben Heyman, Nick Montalvano
The rapid advances in artificial intelligence (AI) have sparked great concern that this new technology will replace jobs and curb employment. To investigate the impact of AI on employment, the August Regional Business Survey asked businesses about AI recruitment and whether they had made adjustments to accommodate employees. Companies have reported a significant increase in AI use over the past year, but few have reported AI-induced layoffs. In fact, for those already employed, our results show that, similar to last year's survey, AI is more likely to cause retraining than unemployment. That said, AI is affecting recruitment, with some companies expanding employment to add skilled workers for AI and some companies to use it. However, future views are expected to see that layoffs and reduced employment plans due to AI use will increase, particularly for workers with university degrees.
More businesses are using AI
A business survey in August asked businesses in New York and upstate New Jersey if they have used AI as part of their business process in the last six months, and if they plan to use it in the next six months. This includes searching for information, marketing, business analytics, data management, customer service and more. I use AI only as an information search tool, but it does not count as an AI user. As shown in the chart below, 40% of service companies report using AI this year, up from 25% last year, with 44% expected to use AI in the next six months. Among the manufacturers, similar size jumps were used, and we were hoping to use AI over the next six months, from 16% last year to 26% this year. These stocks are heading towards the high end of the scope of existing research into AI intake in the workplace.
AI usage is on the rise and is expected to continue to increase
Note: I use AI only as an information search tool, but nothing else counts as an AI user.
As expected, AI usage varies widely across companies in different industries. For example, more than half of companies in the information, finance, and professional and business services sectors reported using AI as part of their business processes, but none of them showed that they were using AI. Approximately 40-45% of businesses in the wholesale and leisure and hospitality sector use it, as about a third of the education and health, personal services and retail sectors do.
Notably, about half of service companies using AI reports, which are evidence of AI penetration into the workplace, about half of AI's AI reports, which are evidence of AI penetration, use AI tools from last year, when they used paid services since last year, which was up 16% points from last year, up 39% points from last year.
As shown in the chart below, companies use AI in a variety of ways, but some of their purposes stand out. Over half of service companies and over 40% of manufacturers using AI use them to search for information, while 50-60% of both types of companies use AI for marketing and advertising. Business analysis was also a common use. Approximately a third of service companies use AI for data management, and a fourth of them use AI for customer service and develop new workflows. Small but substantial share of manufacturers also used AI to develop new workflows and use them for customer service, quality control and accounting.
How companies use AI
How do businesses coordinate their workforce?
Our study sought to assess the extent to which employees are coordinated with AI in four ways. First, companies can fire existing employees as AI completely replaces roles. Second, companies can reduce planned employment and reduce new workers as AI takes over certain tasks or improve productivity. Third, companies may protect new employees who can effectively use AI. Fourth, companies have been able to decide to retrain their current workforce to adapt and utilize AI for their work. We present the stocks of the companies that made each of these adjustments in the chart below, comparing them with expectations from last year for the next six months.
How service companies coordinate their workforce
AI User Share (Percent)
Note: The company was not asked if it employed fewer workers in 2024.
How manufacturers are coordinating their labor force
AI User Share (Percent)
Note: The company was not asked if it employed fewer workers in 2024.
Although AI layoffs were rare, service companies were hoping for more layoffs in the coming months. Only 1% of service companies that have reported giving up workers in response to AI in the past six months have fallen from 10% in last year's survey that said they fired workers for AI. However, 13% of service companies expect layoffs over the next six months. This forecast is tempered by the fact that last year's survey on the same share expected to fire workers, and in fact, this year was rarely the case. No manufacturer reported layoffs this year or last year. No layoffs predicted layoffs for the next six months.
However, about 12% of service companies using AI said they have hired workers who have been in use in the past six months, so almost a quarter of those planning to use AI in the previous few months expect to hire a small number of workers as a result (note: this question was not asked in 2024). This is consistent with the results of the Dallas FED Regional Survey, where 10% of business executives reported that AI reduced the need for workers. Interestingly, AI-related employment declines were concentrated among jobs requiring university degrees. Such employment curbs may be contributing to a small portion of the report of recent college graduates who are struggling to find a job. In contrast, manufacturers using AI did not reduce AI employment, but were expected to reduce employment over the next six months.
This decline in employment, 11% of service companies and 7% of manufacturers said they have hired more workers with AI, and 10-15% of both types of companies expect to hire new workers with AI for the next six months. Companies report that such employment is also concentrated among people with university degrees, consistent with recent findings from the federal government of Atlanta. Although not common, some companies that have lifted or reduced employment, some companies that also hired new workers suggest that the impact of AI on the individual company's workforce is complex.
Meanwhile, as last year, the majority of companies report retraining existing workers exposed to AI. Of the companies using AI, over a third of service companies and 14% of manufacturers report retraining workers according to AI. Companies report retraining workers across the education spectrum, although they do have a few of those with university degrees. Almost half of both types of companies expect to retrain workers to use AI across the education spectrum again for the next six months, similar to expectations reported at this time last year.
A modest economic impact… so far
Our research shows that companies using AI coordinate their workforce for AI, but it is important to note that it applies only to 25-40% of companies using it. Therefore, it does not point to a significant reduction in employment, especially as the impact of employment can be both positive and negative. In fact, our research suggests that people who work are more likely to be retrained than replaced by AI. Additionally, AI is creating employment opportunities for people who are skilled in its use, with some companies hiring this new employee to manipulate this new technology. However, for some job seekers, AI may have made it a little more difficult to find a job as some companies are reducing their employment through their use. Looking ahead, companies anticipated more important layoffs and expanded their employment as they continued to integrate AI into their businesses.
Jaison R. Abel is head of microeconomics for the Research Statistics Group at the Federal Reserve Bank of New York.
Richard Dates is an economic policy advisor to the Research Statistics Group at the Federal Reserve Bank of New York.
Natalia Emmanuel is a research economist for the Research Statistics Group at the Federal Reserve Bank of New York.
Ben Hyman is a research economist for the Research Statistics Group at the Federal Reserve Bank of New York.
Nick Montalbano is a data analysis specialist for the Research Statistics Group at the Federal Reserve Bank of New York.
How to quote this post:
Jaison R. Abel, Richard Deitz, Natalia Emanuel, Ben Hyman, and Nick Montalbano, “Are companies expanding employment for AI?” Liberty Street EconomicsSeptember 4, 2025, https://doi.org/10.59576/lse.20250904
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Disclaimer
The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve system. Any errors or omissions are the responsibility of the author.
