AI challenges traditional monetary policy logic. Historically, lower interest rates spur capital investment that creates jobs. However, if lower rates now incentivize investment in job-reducing AI, the Fed's primary tool for boosting employment may become less effective or even have ambiguous effects, a new dynamic policymakers must understand.

Recent tech layoffs, widely attributed to AI, are more likely driven by rising interest rates and a cultural shift for leaner operations. CEOs may be using AI efficiency as a convenient public justification for these cuts, even if the technology hasn't caused widespread displacement yet.

Despite AI's narrative as a labor-replacement technology, NVIDIA's booming chip sales are occurring alongside strong job growth. This suggests that, for now, AI is acting as a productivity tool that is creating economic expansion and new roles faster than it is causing net job destruction.

The narrative blaming AI for job insecurity is misdirected. The true cause is decades of government promising services it can't efficiently deliver, leading to inflation and distorted markets. AI is a convenient, visible target for problems with deeper roots in policy.

Firms are attributing job cuts to AI, but this may be a performative narrative for the stock market rather than a reflection of current technological displacement. Experts are skeptical that AI is mature enough to be the primary driver of large-scale layoffs, suggesting it's more likely a convenient cover for post-pandemic rebalancing.

Federal Reserve Chair Jerome Powell stated that after accounting for statistical anomalies, "job creation is pretty close to zero." He directly attributes this to CEOs confirming that AI allows them to operate with fewer people, marking a major official acknowledgment of AI's deflationary effect on the labor market.

Recent events, including the Fed's interest rate cuts citing unemployment uncertainty and AI-driven corporate restructuring, show AI's economic impact is no longer theoretical. Top economists are now demanding the U.S. Labor Department track AI's effect on jobs in real-time.

A viral chart linking ChatGPT's launch to falling job openings is misleading. Job openings began declining months earlier, largely due to Fed interest rate hikes. This highlights how complex macroeconomic trends are often oversimplified in popular narratives that rush to assign blame to new technology.

While companies cite AI when announcing layoffs, the data shows cuts are concentrated in industries that over-hired post-pandemic. Job losses in sectors like tech and professional services represent a "reversion to the mean" trendline, countering the narrative that AI is already replacing workers at scale.