Federal Reserve Governor Christopher Waller says AI could reshape the US labor market in ways that monetary policy cannot address.
In a new Bloomberg interview, Waller says the rise of AI has made it more difficult to read the underlying trends in the economy.
He notes that firms are hesitating to hire while they wait to understand how automation and data center investments will affect productivity and staffing needs. He also says many companies are taking a wait-and-see approach, unsure whether AI will immediately replace workers or simply reallocate demand.
“Then you have this AI story, which was people like, ‘We don’t know if we’re going to need to hire, but we’re going to wait and find out. We’re not going to go out and hire a lot of people right away.’
So I think tariff uncertainty, paying for tariffs, trying to sort out what AI really is going to do, kind of put firms on their back foot.”
Waller emphasizes that while the Fed’s tools are designed to manage cyclical fluctuations, it cannot offset structural disruptions caused by technology.
“The AI thing is, the concern I have with the AI, if it does, and I think it will materialize, monetary policy is designed to deal with cyclical movements in the labor market… But this feels like a structural change. Labor demand just drops and doesn’t come back.
That’s something I can’t do anything about. The Fed can’t kind of adjust policy to deal with structural changes in the economy.”
The governor also points to a growing divide in investment patterns.
“If you look at AI, if you take out anything data center, AI-related business, fixed investment is turning down. It’s not widespread… there’s a real reallocation from kind of everything else into AI.”
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