The NY Fed’s Verdict Is In—What Does It Signal for the Economy?

The NY Fed's Verdict: AI Is Reshaping Work, Not Eliminating It

The fear that AI would trigger mass layoffs? The data says otherwise.

A new report from the Federal Reserve Bank of New York reveals that while AI adoption has surged among regional businesses, job losses have remained minimal — and retraining has become the primary response.

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The Numbers

According to the NY Fed's August business surveys:

• 61% of service firms now use AI (up from 40% in 2025)
• 51% of manufacturers have adopted AI (up from 26% last year)
• Only 4% of service firms laid off workers due to AI
• No manufacturers reported AI-related layoffs
• ~13% of service firms actually hired more workers to support AI initiatives

The median share of workers using AI within adopting firms? Just 17% at service firms and 7% at manufacturers — showing adoption is broad but not yet deep.

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What Firms Are Actually Doing

Rather than cutting headcount, businesses are retraining existing workers:

• 35% of service firms report retraining employees for AI
• 20%+ of manufacturers are doing the same
• Training focuses on: AI literacy, prompt engineering, automating routine tasks, and responsible AI use (verifying outputs, understanding bias, data security)

Delivery methods vary widely — from formal workshops and external consultants to informal "show-and-tell" sessions and peer learning.

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Why Some Firms Still Haven't Adopted

Cost isn't the main barrier. Among non-adopters:

• ~50% say their work doesn't lend itself to AI
• ~25% believe current AI isn't good enough for their needs
• ~35% have data privacy/security concerns
• ~35% lack staff with technical skills to implement AI effectively

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The Bottom Line

Three years of NY Fed survey data confirm what emerging research shows: AI is augmenting workers, not replacing them — at least for now.

As the authors note: "Firms are continuing to adapt and change due to AI use, but not by eliminating vast numbers of jobs. Instead, this new technology is reshaping work itself."

That said, the report flags one potential concern: entry-level workers may face barriers as AI substitutes for routine tasks typically performed by newer employees.

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Source: Liberty Street Economics — Jaison R. Abel, Richard Deitz, Natalia Emanuel, and Nick Montalbano, Federal Reserve Bank of New York, September 1, 2026.

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The brAIef Signal — Mapping how New York works with AI.