More Likely to Be Retrained Than Replaced: The New York Fed's Regional Business Surveys on AI and Workers, September 2026

On September 1, 2026, the Federal Reserve Bank of New York's Liberty Street Economics blog published "Businesses Are Using AI to Transform Work, Not Cut Jobs." The post reports the bank's August regional business surveys, which asked firms in the New York and Northern New Jersey region whether they had used AI as part of their business processes in the past six months, questions asked each year since 2024. It is written by staff of the bank's Research and Statistics Group, and it says the views in it are the authors' and "do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System." Parts of it follow, not the whole.

The post says AI use among regional businesses "has continued to rise sharply," that layoffs "have remained uncommon," and that "retraining employees in response to AI remains the primary way firms are adjusting their workforces."

Who Uses AI, and Why Some Do Not

This year, 61% of service firms in the surveys reported using AI, up from 40% last year and 25% in 2024. Among manufacturers, 51% reported using it. Businesses in knowledge-intensive sectors, "such as information, business services, and finance," had the highest usage rates. Firms that used AI only as an information search tool were not counted as users, and the post says these shares "are toward the high end of the range of existing studies of AI use in the workplace."

Within firms, the post says, usage "tends to be concentrated among a small share of workers." Among firms that use AI, the median share of workers using it was 17% for service firms and 7% for manufacturers.

Among firms that had not adopted AI, about half said the type of work they do does not lend itself to AI, and roughly a quarter said AI is currently not good enough to benefit their business. More than a third were concerned about "data privacy, security, or confidentiality," and a similar share about "accuracy or reliability." Roughly a third said they currently lack staff with the technical skills to use it effectively. Cost, the post says, was among the least cited reasons.

Layoffs, Hiring and Retraining

Only 4% of service firms reported laying off workers in response to AI over the past six months, against 1% in last year's survey, and no manufacturers reported layoffs in either year. About 15% of service firms said they had hired fewer workers than they would have without AI. About 13% said they had hired more workers because of it.

"Existing workers are much more likely to be retrained than replaced by AI," the post says. Among businesses that use AI, just over a third of service firms and more than 20% of manufacturers report retraining workers in response to it. The broader research literature, the post says, "also tends to find limited labor market effects from AI adoption so far in terms of layoffs or reduced hiring," though one recent study "suggests entry-level workers may be affected significantly, as AI can substitute for routine tasks often performed by newer employees."

What the Training Covers

Most firms, the responses indicate, are focused on helping employees do their current jobs more effectively, "rather than preparing them for entirely new roles." The training the post describes includes basic AI literacy and instruction on specific tools, automating repetitive or routine tasks, prompt engineering, and AI applications tailored to particular jobs. One firm, it says, had implemented AI for accounts payable and receivable with "human-in-the-loop" oversight.

"Notably," the post says, "many companies emphasized the importance of training employees on responsible AI use, including teaching them how to verify AI outputs, understand potential biases, follow data security protocols, and avoid over-reliance on the technology." Delivery ranged from formal workshops and outside consultants to informal show-and-tell sessions and peer learning.

"That said," the post says, "AI technology and its applications are still evolving rapidly, and these patterns could shift as adoption matures."