Businesses Are Using AI to Transform Work, Not Cut Jobs
Authors:
Jaison R. Abel, Richard Deitz, Natalia Emanuel, and Nick Montalbano
The advancement and adoption of AI have raised concerns over potential job losses. Over the past three years, regional business surveys have asked firms about AI adoption effects on their workforces. This year, over 60% of service firms and about half of manufacturers reported using AI, a notable increase from previous years. Despite this rise in adoption, most firms characterize their AI investments as modest, concentrating usage among a small share of workers. Layoffs remain uncommon, with retraining employees being the primary adaptation strategy.
AI Adoption Has Become Much More Widespread in the Workplace
Our August business surveys indicate that AI adoption is on the rise. Currently, 61% of service firms use AI, a significant increase over the past years (40% in 2025, 25% in 2024). Knowledge-intensive sectors (like information and finance) have the highest AI usage rates. Among manufacturers, 51% reported AI use, up from 26% last year and 16% in 2024.
AI Adoption Has Continued to Increase
Source: Federal Reserve Bank of New York, Regional Business Surveys, August 2024, 2025, 2026.
While adoption is widespread, investments are limited. Approximately three-quarters of service firms and over 90% of manufacturers see their AI investments as minimal. Only 15% of service firms have committed significant resources to AI. Moreover, the median share of workers using AI is only 17% for service firms and 7% for manufacturers.
Why Businesses Have Not Adopted AI
Cost is not a major deterrent for non-adopters, who cite reasons like the unsuitability of their work for AI, lack of technical skill, and concerns about data quality and privacy.
Reasons Businesses Have Not Adopted AI
Source: Federal Reserve Bank of New York, Regional Business Surveys, August 2026.
Retraining Remains Common, Layoffs Limited
Only 4% of service firms enforced layoffs due to AI, a slight increase from the previous year. Some firms hired more employees to help leverage AI, highlighting that existing workers are more likely to be retrained than replaced.
Ways Service Firms Are Adjusting Their Workforces
How Are Businesses Retraining Workers?
Firms focus retraining on enhancing current job performance rather than preparing for new roles. Training includes basic AI literacy, usage of AI tools, and responsible AI use. Training methods range from formal workshops to peer learning.
Looking Ahead
Data indicates that firms are adapting to AI without reducing workforce numbers significantly. The pattern suggests AI is more likely to augment rather than replace jobs, although this could evolve as technology and applications mature.
Authors’ Bios:
- Jaison R. Abel: Head of Microeconomics at the Federal Reserve Bank of New York.
- Richard Deitz: Economic Policy Advisor at the Federal Reserve Bank of New York.
- Natalia Emanuel: Research Economist at the Federal Reserve Bank of New York.
- Nick Montalbano: Data Analytics Specialist at the Federal Reserve Bank of New York.
Citation:
Jaison R. Abel, Richard Deitz, Natalia Emanuel, and Nick Montalbano, “Businesses Are Using AI to Transform Work, Not Cut Jobs,” Federal Reserve Bank of New York Liberty Street Economics, September 1, 2026, https://doi.org/10.59576/lse.20260901.
Disclaimer: The views expressed do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System.
