Concerns about a potential slowdown in hiring, coupled with the increasing influence of artificial intelligence on workplace productivity, are prompting debate within the Trump administration and raising questions among investors. While the administration continues to champion AI development, some of its economic advisors are suggesting the technology’s rapid advancement could lead to a temporary cooling in the labor market.
Kevin Hassett, director of the National Economic Council, articulated these concerns in a appearance on CNBC’s “Squawk Box.” He noted “mixed signals in the job market” alongside “really, really positive signals in the output markets.” Hassett suggested that strong U.S. Gross domestic product growth in the second quarter of may be masking a developing trend: companies becoming more efficient through AI and therefore less inclined to expand their workforce. “There could be a little bit of, almost, quiet time in the labor market, because firms are finding that AI is making their workers so productive that they don’t necessarily have to hire the new kids out of college and so on,” he said.
This assessment marks a subtle shift in tone from the Trump administration, which has largely presented a positive outlook on AI’s potential. President Trump has signed executive orders aimed at reducing regulatory barriers and fostering the growth of AI infrastructure, including data centers. The administration’s commitment to the sector was further underscored by the appointment of David Sacks as its “czar” for AI, and cryptocurrency.
However, the possibility of AI-driven productivity gains impacting hiring is not going unnoticed. Hassett was quick to emphasize that any such slowdown would likely be temporary. He believes that robust output and income growth will ultimately stimulate new spending opportunities, offsetting any initial negative impact on employment. “Because there’s so much output growth and income growth, that’s the kind of thing that a free market will work out relatively quickly as, you know, new ways to spend money emerge,” he explained.
The debate echoes broader anxieties about the potential for AI to displace entry-level jobs. While these fears are not new, they are gaining traction as AI technologies become increasingly sophisticated and integrated into various industries. The Trump administration’s acknowledgement of this possibility, even with its continued support for AI development, signals a growing awareness of the complex economic implications.
The administration’s stance on financial support for AI infrastructure has been firm. David Sacks explicitly stated earlier in that there would be “no federal bailout for AI.” This position came in response to a request from Sarah Friar, CFO of OpenAI, for a federal “backstop” to support infrastructure investments, a request she later retracted.
Alongside the economic considerations, the administration is actively seeking to bolster its AI talent pool. A hiring campaign launched in reportedly attracted interest from approximately 25,000 individuals hoping to join the administration’s “Tech Force,” a cadre of engineers dedicated to advancing AI initiatives. This initiative underscores the administration’s commitment to maintaining a competitive edge in the rapidly evolving AI landscape.
The Department of Labor is also playing a key role in preparing the workforce for the age of AI. According to a blog post, the department will focus on three core areas: expanding AI skills development, evaluating AI’s impact on the labor market, and piloting new retraining programs to help workers adapt to changing job requirements. This proactive approach aims to mitigate potential disruptions and ensure that American workers are equipped to thrive in an AI-driven economy.
The situation presents a delicate balancing act for the administration. On one hand, it is keen to promote AI as a driver of economic growth and innovation. On the other, it must acknowledge and address the potential for short-term disruptions to the labor market. The coming months will be crucial in determining whether the administration’s policies can successfully navigate this complex terrain and ensure a smooth transition to an AI-powered future.
Investors are closely monitoring these developments, seeking clarity on the potential impact of AI on corporate earnings and employment trends. The mixed signals emanating from the administration, coupled with the inherent uncertainty surrounding AI’s long-term effects, are likely to contribute to market volatility in the near term. The focus will be on whether companies can sustain strong output growth without significant increases in hiring, and whether any slowdown in job creation will be offset by new opportunities created by the AI revolution.
