Federal Reserve Chair Jerome Powell delivered a pointed message to the next generation of workers last week: Stop worrying about artificial intelligence and start learning how to use it.
Speaking before nearly 400 Harvard economics students in a wide-ranging conversation moderated by professor David Moss, Powell acknowledged that Gen Z is entering one of the more challenging job markets in recent memory—and said AI is both part of the problem and the solution.
Moss put Powell on the spot immediately, asking on behalf of the students in the room: “They’re entering into an uncertain time—an economy where new job formation is lower for many reasons. In particular, jobs that were plentiful a couple of years ago for students coming out of college are no longer so. And AI sits as this remarkable technological transformation that is both promising and existentially threatening.”
Powell said he and his colleagues at the central bank were “well aware of the current situation for students coming out. It’s a time of very low job creation. And also you have AI going on.” Allowing that something “more longer-term, more secular” is probably happening around technology and AI, he was direct: “There’s no denying it’s a challenging time to enter the labor market.”
Powell also cited shifts in immigration policy, along with the disruptive forces of new technology. But rather than counsel caution, he pointed students toward the tools disrupting their future careers: “I think you’re in a situation where you need to invest the time to really master the use of these new technologies, and that should stand you in good stead.”
Powell spoke from personal experience. “My observation is that these large language models make people much more productive,” he said. “I feel like it’s making me more productive, because I can learn things really quickly.” He added that conversations with his son and others in the workforce had reinforced that view: For those who learn to use AI well, it is an amplifier, not a threat.
The AI-washing wave is already here
The remarks come at a delicate moment. The U.S. unemployment rate remains low, but Powell was candid that the headline figure offers little comfort to recent graduates struggling to land their first jobs. New college hires that were plentiful just a few years ago have grown scarce, he noted, as companies assess what work can be automated.
Powell all but confirmed that many large companies are eager to follow Block CEO Jack Dorsey’s lead and lay off thousands of workers, a practice that some, including OpenAI CEO Sam Altman, call “AI washing.” He said that “major U.S. companies—and we talked to a lot of those people who run those companies—they’re all looking at what they can do” in terms of staff reductions. “The truth is, they can take out a lot of jobs that can be automated by a very smart large language model. They just can, and they will, because their competitors are doing it, and they can’t afford to have higher costs than their competitors.”
Still, Powell pushed back against fatalism. He cited the historical pattern of technological disruption—stretching back to the invention of the loom—as evidence that new tools, however threatening in the short term, ultimately raise productivity and living standards.
Jerome Powell on the Luddite era
Powell put on his econ nerd hat for a second, citing all the similar technological advances throughout the history of modern capitalism. “If you look back through history—to generalize, this has been going on for a couple hundred years, since the loom was invented, right, to put all the people who were doing weaving out of business. But in all cases, it has wound up raising productivity and raising living standards—as long as the society keeps producing people who have the skills and aptitudes to benefit from that technology.”
Powell predicted “that will be the case here,” when it comes to AI—just a new version of the loom. “It may take some patience and all that,” he said. “But in the longer term, this economy is going to give you great opportunities. And just be a little optimistic about that.”
The crucial question, though, is just how much longer that longer term ends up being. When mechanical weaving displaced textile workers in 19th-century England, after all, the transition was brutal, sparking the Luddite movement of displaced workers destroying the machines that had taken their jobs. What if the “long term” is the whole life span of the Gen Z generation?
That was exactly Moss’s follow-up question: Does longer term mean 10, 20, or even 40 years? “You know,” Powell responded, “it’s so hard to say.” All the AI adoption that he sees happening in the 2020s is focusing on existing middle management, back-office jobs, and Powell speculated that fluent AI users should be unaffected by this, while admitting that he didn’t know the answer. “There can be a period during which it’s challenging,” he acknowledged to the professor, “and this may be one of those. But nonetheless, I would just say it’s out there, and it’s out there to be done. And I would be, medium and longer term, very optimistic about this economy compared to any other economy.”
