It's a big deal when technology trends leak into economic reporting. Yesterday, Federal Reserve Chairman Jerome Powell was asked about the economic impact of AI at a press conference after the Federal Open Market Committee meeting, which decided to cut interest rates by a quarter of a percentage point.
Powell discusses Impact of AI on productivity He noted that AI and automation are contributing to a “structural” boom in the U.S. economy, with productivity consistently above 2%, a level he “never imagined.” He said he believes this productivity is a key reason the Fed has a more substantive economic outlook for 2026.
He also addressed the potential labor market impact as automation and AI replace certain occupations, including white-collar jobs. While he acknowledged that companies are using AI to freeze hiring and layoffs, he said that despite these reports, unemployment claims remain low, reflecting what he called a “low-hire, low-firing” economy.
Conflicting employment signals in the age of AI
Undoubtedly, early career professionals are facing disproportionate AI disruption, with entry-level jobs being drastically reduced. Survey of salary levels From researchers at Stanford University Erik Brynjolfsson, Bharat Chandar, and Ruyu Chen use data from ADP to show real-time changes in employment patterns through July 2025. ADP is a multinational company that provides human resources and payroll services. The data sample includes millions of employees from tens of thousands of companies.
The researchers' most shocking finding is that employment among young workers (22 to 25 years old) in the jobs most exposed to AI, such as software developers and customer service representatives, has declined by 13% relative to the second half of 2022. In contrast, employment for experienced workers in the same occupation has remained stable or even increased.
The authors suggest that AI is disproportionately replacing codified knowledge, the formal training and “book learning” that new graduates bring with them. In contrast, it is less capable of replacing tacit knowledge, that is, practical judgment, intuition, and experience that accumulates over time. This helps explain why older employees are holding on to their positions while younger employees are losing momentum.
Recently InformationWeek articleI shared the consensus from CIOs I've interviewed over the past year about the impact of AI. Agenttic AI is already reducing task times, in some cases cutting them in half, reshaping how work gets done and putting pressure on labor models. While some roles were shrinking, others were radically redefined.
Bottom line: AI has the ability to impact large parts of the labor market. The MIT study, which applied 32,000 skills to 923 occupations in 3,000 counties, found that 11.7% of the U.S. labor market could be replaced by: Current AI capabilities. These findings are particularly concerning for younger workers, whose work experience and knowledge may not be suitable for the corporate jobs that are being enhanced (but not replaced) by AI.
EY Pulse study: AI productivity gains aren’t causing layoffs
Affirming Chairman Powell’s statements regarding stable layoff rates, EY US AI Pulse Survey We find that the majority of companies are choosing to reinvest in the productivity gains from AI rather than reducing existing headcount. The study surveyed 500 senior leaders (i.e., decision makers in roles at senior vice president level and above) across a variety of industries, and data was collected from April to October 2025.
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96% of organizations investing in AI report an increase in productivity compared to last year, with more than half (57%) seeing a significant improvement.
When asked how their organizations are reinvesting in the productivity gains from AI, these leaders cited the following areas:
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Extend existing AI capabilities (47%).
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Developing new AI capabilities (42%).
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Strengthening cybersecurity (41%).
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Upskilling/reskilling employees (38%).
Only 17% said profits were being used to reduce staff. Notably, EY's data is consistent with Dresdner Advisory Services' findings on agent AI, showing that companies with mature data processes are looking to widely leverage agent AI for transformation, not just cost savings. Data suggests that many companies are focused on: only Companies looking to use AI to reduce headcount have not invested in the underlying technology needed to take advantage of the capabilities AI provides.
This is important news for CIOs. Because it means the CIO will be the beneficiary (not the victim) of productivity gains.
Great ROI and confidence in further AI investments
EY research shows that companies that implement AI technology see a significant return on investment. In addition to the productivity gains listed above, survey respondents reported the following positive outcomes from using AI:
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56% report measurable improvements in financial performance related to AI.
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90% say improving productivity through AI is important to shareholder value.
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94% believe AI productivity improvements will be a catalyst for industry transformation.
Two other research points are increased interest from senior leaders in responsible AI, increased commitment to ethical AI operations, and increased transparency with customers regarding the use of AI.
parting words
AI is fundamentally changing the workforce and the way work is done. Early adopters who industrialized data and processes are fighting to win, not just pursuing short-term profits. These successful early adopters have strategic coherence and a clear company-wide plan for AI. They use it to strengthen their competitive advantage within the market, rather than seeking quick and isolated profits.
With that in mind, this news, albeit seasonal, is not a bad thing for those in organizations that make AI work together. And for the Gen Z workforce, which faces tremendous pressure in entry-level jobs, these organizations are the ones to watch. They will be the ones hiring and retaining talent for the new year.
