Report: AI Adoption Leads to Retraining, not Replacing, Workers

Despite fears that artificial intelligence will lead to major workforce reductions, a new report from the Federal Reserve Bank of New York suggests that’s not happening happening … yet. In “Are Businesses Scaling Back Hiring Due to AI?,” the bank found that while AI adoption has increased across industries, most firms are retraining employees rather than replacing them.

It bucks a lot of industry buzz, with cloud giants like Microsoft, Google, and Amazon undergoing rounds of layoffs in parallel with large AI investments. For example, in 2025 alone Amazon has committed more than $45 billion to AI infrastructure and hardware projects, with CEO Andy Jassy noting in a memo reported by Business Insider, “As we continue to invest in generative AI, we do expect that some roles — especially in corporate functions — will evolve or no longer be needed.”

The NY Fed is one of 12 regional banks in the U.S. Federal Reserve System that oversee monetary policy implementation, financial supervision, and economic research. And some of that research, published last month, sheds some data-based light on the matter.

“Businesses reported a notable increase in AI use over the past year, yet very few firms reported AI-induced layoffs,” said the report published by Liberty Street Economics, a research blog published by economists at the NY Fed. “Indeed, for those already employed, our results indicate AI is more likely to result in retraining than job loss, similar to our findings from last year.”

However, the blog also provides counterpoint warnings for the future, with 13% of service firms expecting layoffs due to AI over the next six months. Also, nearly a quarter of such firms that are planning to use AI expect to hire fewer workers.

“This is consistent with findings from a Dallas Fed regional survey, which found that 10% of business executives reported that AI decreased their need for workers. Interestingly, the reduction in hiring due to AI was concentrated among jobs that require a college degree.”

So all the angst about “AI taking my job” may well be realized soon.

The report, with data gathered in August, compared AI usage among service and manufacturing firms, revealing some interesting divides between the two market segments.