Federal Reserve Chair Jerome Powell warned that AI-driven automation has pushed U.S. job creation to ‘pretty close to zero,’ signaling the arrival of an ‘AI hiring apocalypse’ even as economic growth persists — a shift that has forced the Fed to cut rates amid fears of a K-shaped economy and a deepening labor divide. (Source: Image by RR)

Powell Warns of a ‘K-Shaped’ Economy Favoring the Wealthy and Big Tech

Federal Reserve Chair Jerome Powell issued his starkest warning yet about the impact of artificial intelligence on the U.S. labor market, saying job creation has nearly stalled despite a seemingly healthy economy. Speaking after the Federal Open Market Committee (FOMC) meeting on October 29, Powell said the official 4.3% unemployment rate masks a deeper slowdown once statistical adjustments are made — “job creation is pretty close to zero,” he told reporters.

Powell, as noted in fortune.com, linked the weakness directly to the rapid adoption of AI and automation, echoing what many CEOs have told investors in recent months: technology is enabling companies to “do more with fewer people.” A wave of layoffs and hiring freezes across major employers, including Amazon, Target, and Paramount, supports the trend. “Much of the time they’re talking about AI and what it can do,” Powell noted, warning that many firms expect they “won’t need to add headcount for years.”

The comments came as the Fed cut interest rates by 0.25 points, lowering its benchmark range to 3.75%–4% to address “downside risks to employment.” Powell acknowledged the economic paradox AI has created — strong corporate investment and rising productivity, but weak hiring and growing inequality. He said data center construction and AI-driven infrastructure spending are keeping GDP growth positive, but warned of a “K-shaped economy” where affluent households benefit from tech-fueled gains while lower-income Americans struggle.

Economists are now calling the phenomenon the “Great Freeze” — a labor market split where high-skilled tech jobs surge while routine office and managerial roles vanish. According to Challenger, Gray & Christmas, nearly 946,000 layoffs have been announced this year — the most since 2020 — with 17,000 explicitly tied to AI and 20,000 to automation. Powell said the Fed faces a “difficult balancing act” between keeping inflation in check and preventing further job losses. “There is no risk-free path for policy,” he said. “We’re navigating the tension between our employment and inflation goals as carefully as we can.”

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