The Fed Admits It May Not Have the Tools to Help Workers Displaced by AI
The concern, articulated by Fed Governor Lisa Cook last month and echoed by several colleagues, is that AI displacement is structurally different from a typical downturn. If AI raises productivity while simultaneously eliminating jobs, cutting interest rates could actually fuel inflation without creating new work for displaced workers. The people losing jobs wouldn’t benefit from cheaper borrowing costs, because the problem isn’t demand; it’s that their skills are no longer needed. Block’s announcement last week that it’s cutting 40% of its workforce precisely because AI made those roles unnecessary is exactly the kind of case study the Fed is wrestling with.
The Fed’s framework is built around a “natural” unemployment rate currently pegged at about 4.2%, below which inflation pressures build. AI complicates that entire framework. Higher unemployment from displacement, combined with stronger wages and wealth gains for workers whose skills complement AI, could push inflation upward at the same time the job market is hurting. That’s not a scenario rate cuts are designed to fix.
Not everyone at the Fed agrees. Fed chair nominee Kevin Warsh has called AI a disinflationary force and wants rates cut to match, but his view isn’t widely shared among current officials, and he hasn’t even been formally nominated yet. Richmond Fed President Tom Barkin summed up the uncertainty plainly: the only thing you know for sure is that the forecasts are going to be wrong.
71% of Public School Teachers Are Working a Second Job… During the School Year
Teaching has never been a path to wealth, but a new Gallup survey released today makes clear just how far things have drifted. Nearly three-quarters of public school teachers hold at least one side job, and 85% of those doing so are working it during the school year, not just over summer break. Driving Ubers, tending bar, delivering food: nearly a third of teachers with side gigs are doing work that has nothing to do with education.
The pay data explains why. Public school teachers earn about 27% less than comparably educated workers in other fields, the widest gap on record since the 1970s. For male teachers, that gap is 36%. Just 28% of teachers say they’re living comfortably. More than half of those who are financially struggling report feeling burned out very often or always.
Former U.S. Education Secretary Margaret Spellings called the low pay “corrosive,” a signal to anyone considering the profession that it doesn’t value them. That pipeline problem has real consequences for employers, too. A workforce that can’t attract or retain talent eventually becomes someone else’s problem, and in education, everyone is downstream.
Gen Z Is Showing Up to Work Missing Skills That Can’t Be Taught in a Classroom
A Wall Street Journal piece by NYU psychology professor Tessa West makes a case that should stop hiring managers in their tracks: Gen Z is entering the workforce without the social and interpersonal skills that used to develop naturally, and the consequences are already showing up in turnover data and broken management relationships.
West points to a telling statistic: only 56% of Gen Z adults had been in a romantic relationship by adulthood, compared to more than 75% of prior generations. That might sound unrelated to work, but those early relationships are where people learn to handle conflict, navigate difficult conversations, and cooperate with someone who sees things differently. Add in pandemic-era remote schooling that eliminated organic in-person collaboration, and a generation that communicates primarily through text, and you get workers who become anxious in exactly the situations that matter most: unplanned conversations, high-stakes meetings, face-to-face feedback.
The risk West identifies isn’t just awkward onboarding. It’s a broken leadership pipeline, a generation of employees who never become seasoned insiders because they keep leaving before they understand what went wrong. For employers, the practical response isn’t to lower expectations; it’s to stop assuming new hires know the unwritten rules. Write them down. Build in mentorship. The companies that crack this will have a genuine competitive advantage, because right now, the bar isn’t very high. If finding strong candidates is part of the challenge, our recruiting team can help you identify candidates with the harder-to-screen-for qualities.
Staffing your team doesn’t have to be hard.
Reach out and see how we can help.
Frequently Asked Questions
Rate cuts work by stimulating demand; making borrowing cheaper encourages businesses to invest and hire. But if AI is eliminating jobs because businesses no longer need certain skills, not because they can’t afford to hire, lower rates don’t create new roles for displaced workers. Worse, if AI also raises productivity and wages for those still employed, cutting rates in that environment could push inflation higher without helping the people who lost jobs. Fed Governor Lisa Cook has flagged exactly this concern.
According to data from the Economic Policy Institute and the Center for Economic and Policy Research, public school teachers earn about 27% less than workers with comparable education in other fields, the largest gap on record since the 1970s. For male teachers specifically, the gap is 36%. A new Gallup survey found that only 28% of teachers say they’re living comfortably on their income.
NYU psychology professor Tessa West argues that Gen Z had fewer opportunities to build interpersonal skills that earlier generations developed through early relationships, in-person schooling, and unstructured social time. COVID accelerated the problem by forcing remote learning during critical developmental years. The result is workers who are often anxious in unscripted, face-to-face situations, exactly the ones that matter most at work.
Don’t assume new hires know what you consider common sense. Unwritten workplace norms need to be made explicit. Building structured mentorship, creating low-stakes opportunities to practice difficult conversations, and giving clear, frequent feedback all help. The employers who invest in developing young talent now will have a meaningful edge as this generation matures into leadership roles.
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Reuters/The Fed: Why rate cuts may not save AI-displaced workers
Today’s job market news and headlines include a new Gallup survey that shows 71% of America’s public school teachers are working side jobs, and not just over summer break either. Their pay gap is the worst it’s been in 50 years. Also, a new Wall Street Journal piece makes a case that Gen Z is arriving at work missing basic social skills, and the data behind it might surprise you. But first, the Federal Reserve just admitted that they’re not sure they can help you if AI takes your job. A new Reuters report explains why. Now I see that and say, why would we expect the Federal Reserve to help us anyway? They don’t think they can. I wouldn’t have expected them to, but nonetheless, they’re talking about it.
So here’s what happened. Last week, if you haven’t heard the story by now, you’re probably one of the last in America. But Block, the parrot company of Square and Cash App, announced it’s cutting 40% of its workforce, which is roughly 10,000 people. And they say it’s because AI has changed how the company operates. Their CEO, Jack Dorsey, said AI paired with smaller and flatter teams are enabling a new way of working, which fundamentally changes what it means to build and run a company. So think about that. This isn’t a company struggling, as I talked about last week when it was first announced. Block is restructuring because AI makes it possible to run their business with far fewer people. And this is a straight white-collar company. We’re talking coders, data analysts, 100% knowledge work.
And these are the jobs that we basically told an entire generation of young people to go to college for. I know I did with my kids, and this is a story that is changing so rapidly. We’re all going to have to adapt, and most importantly, we all need to be paying attention to it. But here’s where the Fed comes in. Normally, when layoffs spike, the Fed cuts interest rates to get hiring going again. But Fed officials are saying this time might be different. Yes, this time is absolutely going to be different. Fed governor Lisa Cook warned last month that if AI keeps raising productivity while eliminating jobs, rate cuts could actually fuel inflation without helping displaced workers at all. So in plain English, the Fed is saying we might not be able to help you this time. Well, yeah, I mean, I that’s what I would expect in this scenario.
And that might be a shift in how the safety net has historically worked, but there’s nothing historically similar about what AI is doing in the workplace. So that is the reality that we all have to face right now. Fed chair nominee Kevin Walsh sees it differently. He has called AI a significant disinflationary force. And he wants the Fed to cut rates to match. But that view is not widely shared among the current officials. So we’ll have to see what happens there. Warsh still hasn’t been confirmed, let alone even formally nominated at this point. So it’s just a whole lot of unknown in that regard. But the Fed’s own research tells you how seriously they’re taking it. And if you are someone who’s on the side of AI being much ado about nothing, this is yet another data point that you should pay attention to.
Whether they can help or not, that’s a different conversation. But the very fact that they’re thinking about it and talking about it and concerned about it should signal to you that this is very real. So that’s what is going on with the Fed right now. Also, a 2024 Brookings Institution paper found that more than 30% of U.S. workers could see half of their job tasks disrupted by AI. I’ve talked about that already, too. So when you see these things, they all start to pile up. Richmond Fed president Tom Barkin, he was honest about this. He said the only thing you know for sure is these forecasts are going to be wrong. I can appreciate that. I’m a bit of a doomer, of course.
If you’ve listened to me at all at this point, you realize that when it comes to my concern about AI job displacement, there’s a lot of people who like to spin a completely different narrative, namely David Sachs, who is the White House’s AI czar. He keeps saying that AI is creating jobs, if anything. So the bottom line is that the people in charge of economic policy are telling us they’re not sure if the tools at their disposal will work for what’s coming. And I appreciate that. I don’t appreciate the Fed’s existence necessarily, but I do appreciate that. They’re not panicking, they’re just being open, they’re being transparent. Not everyone is about that right now. Um, that is for sure. But if the Fed can’t cushion this, workers need to be preparing for themselves. I mean, that is the bottom line. I think workers should always take responsibility for their own career stability, their own career future.
Don’t wait for someone else to figure it out. Certainly not in this case. So if you’re not already on board with AI, the message that I will give today is the one that I’ve been giving for months now, probably more than a year now, is use it to elevate whatever it is you do. Embrace it, don’t ignore it, get involved and get in the game. So that is my AI soapbox for the day.
Gallup: 71% of teachers are working a second job
Let’s move on to the next story. And that’s that 71% of America’s public school teachers are working a second job. And as I said earlier, this isn’t just over the summer, which has happened historically. They get a few months off. It’s normal for teachers to work, but a new Gallup survey has very different numbers and they’re worse than I would have expected. The survey found that 85% of teachers with side jobs are working them during the school year while they’re teaching. Why they we would like for them to be focused on teaching.
One teacher that was uh featured in the report, who’s from Washington State, teaches fifth grade during the day and then works as a spray tanner at night. Her husband, who’s also a teacher, paints houses on the side. And they’re trying to save for a house, and they say it feels nearly impossible when they’re two teachers’ salaries. I mean, that is a sad state of things for sure. We know how important teachers are. My mother was a teacher in public school. There is no more noble profession. The education system is incredibly flawed, but it’s not the fault of the teachers, and we need to be taking care of these folks so they can take care of our students because that is our future. That’s what we rely on.
Now, former U.S. Education Secretary Margaret Spellings called it by saying our teachers feel so financially strained that they have to seek additional employment. This is at odds with what we say we value. Yes, I agree with that statement 100%. And the pay gap backs it up. Public school teachers earn 27% less than comparably educated workers in other fields, and that’s the widest gap on record going back to the 1970s. For male teachers, that gap is 36%. That is massive. Only 28% of teachers say they’re living comfortably, and 52% of those who are financially struggling report feeling burned out very often or always. So this is a workforce story more than an education story. My thoughts on the education system aside, that is not relevant here because when 71% of people in a profession need to have a second job or a side hustle to make ends meet, that’s a big compensation problem.
And there’s a lot of long-term risk associated with that. Uh spelling’s warned that the percentage of low pay sends a corrosive signal to anyone thinking about becoming a teacher. If you can’t afford to attract talent or the profession, the pipeline dries up. It affects everyone. So that’s a sad state of things for sure.
WSJ/Tessa West: Gen Z and the social skills gap
So in our final headline today, this is a story about Gen Z. I hate picking on Gen Z. Uh I didn’t write this article, I’m just a messenger here, but apparently they are showing up to work missing uh basic social skills, according to a Wall Street Journal article. It said that it’s indicative of a problem that could break the leadership pipeline for an entire generation. I think that’s a pretty profound statement. Uh the piece was written by a New York University psychology professor, her name is Tessa West. And what she said is that only 56% of Gen Z adults have had a romantic relationship by adulthood.
And compare that to previous generations where more than 75% had a romantic relationship entering into adulthood. And why does that matter, right? That was my first thought. But it matters because those early relationships are where people learn to cooperate, handle conflict, and navigate difficult conversations. West, who wrote the article, says there’s a direct link between communicating well with a partner and doing the same with a coworker or boss. I never thought of that before, but it does make sense. And on top of that, more college students now learn online than in person. Back to the education system being inherently flawed. There we go again. So the in-person teamwork and normal uh learning and interacting that used to happen on campus is largely gone.
And Z Gen Z communicates primarily through text and messaging, which in many cases makes them anxious in situations that matter most at work, which are unplanned conversations, high-stakes meetings, and face-to-face feedback. So the result of all this is higher turnover among young hires. And employees who leave without understanding what went wrong is a problem for their next step. I mean, it’s just it’s a domino effect, right? Managers can’t figure out new workers right now, they’re struggling. West warns that if the trend continues, we are heading for a crisis, which will be a generation of employees who never become seasoned insiders and capable of either collaborating or leading. Well, that is not a positive thing to look forward to. Um and it’s not just a kids these days story. It’s not.
This is this is a problem. Gen Z grew up in a world that gave them fewer chances to build these skills. Many of them, every all of them for the most part, unless they were already out of school, had to uh be educated remotely when COVID hit. I mean, that was a nightmare. If anyone listening went through that, you know how bad that was for personal development. A lot of issues depending on uh the situation at home, and just nightmare stories from that set kids back in many respects from education and social perspectives. Also, digital communication. This is taking the place of talking on the phone, getting together in person. Parents are overprotective. I don’t think the article mentions that, but that has certainly been a big factor.
We don’t let kids just roam and figure out things on their own like we used to. That’s off topic for the job market. But this is relevant because Gen Z is struggling in the workplace for all these reasons, and it’s not their fault, it’s the reality we’re all dealing with. So if you’re an employer, don’t assume your new hire knows what you would consider to be unwritten rules. Put them in writing. And the companies that figure out how to develop young talent, how to get through this, how to improve it, they’re going to have a competitive edge. And if you are a young job seeker, here’s the honest truth: if you can walk into a room, handle an uncomfortable conversation, and build rapport and relationships with people who aren’t your age, you are going to stand out. You’re going to be ahead of the crowd.
And that is unf it’s both good and bad, right? It’s good for anyone who can do it. Bad because the bar just isn’t very high. Uh, that is the unfortunate reality. So lots, lots of things changing in the world right now, and all these changes have impacted the job market and the the workplace specifically, and we all have to figure out how to adapt, how to evolve. Um, and then of course add AI on top of all this, and it’s going to get even weirder faster. So that is it for today. Those are the big headlines. We do have some interesting data coming out this week. Jobs Report is coming out, both ADP and BLS, I believe, I’ll have over the days to come this week. So stay tuned on that. We will see what the numbers tell us, and I’ll report on them.
Fun fact: High ceilings boost creative thinking
But before we go, here’s a fun fact: high ceilings can encourage more abstract and creative thinking, while low ceilings are better for detail-oriented analytical work. I did not know that. I will take for granted that that is accurate. High ceilings, I think I have a medium ceiling where I am, so maybe I’m somewhere in the middle. But I wish you all the appropriate ceiling height for whatever it is you endeavor today. So good luck. Thanks for listening. Please like, subscribe, share with anyone you think might be interested, and I will look forward to talking to you soon.
