Growing Number Seeking To Increase Labor Productivity Via AI
New England employers are mostly planning to keep labor levels steady, but they are increasingly turning to artificial intelligence to boost output without needing to hire new workers, according to a new report from the Federal Reserve Bank.
In a compilation of analysis and insights from business and banking contacts around New England, the Fed said employment in the region “increased slightly, and wage growth was modest” over the last six weeks and that hiring has “proceeded cautiously in part because of ongoing policy uncertainty and was concentrated among select manufacturing and IT services firms.”
With the exception of one IT firm that told the Fed it planned to ramp up hiring in response to a recent surge in demand, “no other contacts (in any industry) expected to engage in either significant hiring or significant layoffs going forward,” the central bank wrote in the latest Beige Book.
“A growing number of employers, across diverse industries, sought to increase labor productivity using AI and other technologies, reducing the need for hiring,” the report said.
The unemployment rate in Massachusetts climbed again to 4.8% in May, while the national rate remained at 4.2%. The state unemployment rate has been rising for more than two years from a low of 3.3% in April 2023 and total employment has increased only about one-tenth of a percentage point over the last year.
State officials hope to spur AI here and have sought to promote the technology that is now impacting global economies as U.S. companies compete with China in a technological race. Skeptics and opponents say AI’s rapid evolution could be dangerous with unresolved ethical questions and job displacement.
“What I’m focused on is leaning into the investments that we’re making here on AI. I’ve said that I want Massachusetts to be a global hub for applied AI, using AI to help us more quickly solve problems, whether it’s curing diseases and developing treatments, or figuring out the energy strategy and how to build greater resilience,” Gov. Maura Healey said last month when asked about AI regulation.
The Fed’s newest Beige Book broadly described the region’s economy since early June: “Economic activity was flat or up slightly. Retail revenues decreased modestly, and tourism revenues edged lower, in part because of fewer visitors from Canada. Price increases were modest overall, although tariffs drove above-average price increases in a few cases. Home sales increased modestly. Hiring plans remained conservative amid a guardedly optimistic outlook.”
