Federal Reserve Board Governor Cook outlines how AI could lift productivity while reshaping labor markets and the neutral rate

The Federal Reserve Board published opening remarks by Governor Lisa D. Cook for an “AI and Productivity across the Economy” panel, updating her views on how artificial intelligence could affect productivity, employment, and monetary policy. Cook said she is cautiously optimistic that AI will support innovation and long-run productivity growth, but warned that adoption could trigger significant “creative destruction” and a major reorganization of work, with job displacement potentially preceding job creation. Cook noted the Federal Reserve is using AI in limited internal applications such as summarizing documents, generating code, and planning travel, alongside a broader research effort on AI’s macroeconomic effects. She pointed to early signs of labor-market churn, including weaker demand in some occupations such as coding and higher unemployment among recent college graduates, while the overall unemployment rate remains low at 4.3 percent and layoffs are subdued. Cook highlighted two monetary policy issues: a productivity boom could keep growth strong even if unemployment rises, meaning higher unemployment may not indicate slack and demand-side easing could add inflation pressure; and surging AI-related investment in data centers and chips despite elevated interest rates could imply a higher current neutral rate than before the pandemic, with longer-run effects uncertain and potentially reversing as productivity gains arrive or if rising income inequality lowers the neutral rate.