AI isn't going to lead to mass unemployment, displacement but will create stress - Mary Daly

[Federal Reserve Bank building sign, San Francisco, California]
Peter Gridley

AI is not going to lead to mass unemployment or mass displacement, but it will create a lot of stress, according to San Francisco Federal Reserve Bank President Mary Daly.

It will be difficult for people, especially for fresh graduates, according to the Federal Open Market Committee's alternate voting member.

Daly was speaking in a panel discussion before the 2026 Reagan National Economic Forum.

"If you're a brand-new graduate who trained in computer science and you thought you were going to get a job in one of the tech companies or somewhere else doing coding. And you know that those coding jobs aren't available anymore because AI is doing some of that coding or a lot of that coding," said Daly.

"That creates a lot of stress. Interestingly, the stress is more generational than you think because the parents of those students encourage their kids to take these types of courses only to find out they didn't have a ready-made job, and now they've got to do some additional training."

"So I think that it's really a call to the university and educational system to help people be AI-enabled once they graduate," she said during the discussion.

When asked about the productivity surge from AI, the San Francisco Fed president said, "We've got the productivity surge a little bit earlier this time. And what's problematic is it's hard for economists or anyone to link it directly back to the AI investments."

"In fact, if you talk to companies, they say, haven't seen the productivity yet, but they're doing it through capital deepening. Investing. That's raising their productivity per worker, and that's positive thing."

"We know that AI is going to do tremendous things. We just don't know how quickly it will be done. I'm pretty bullish on the future productivity growth, but I also am very evidence-based. But I want to see some more evidence that this is actually picking up durable, sustained gains in productivity," she noted.

When asked if there is a labor supply issue in the country, the San Francisco Fed president said, "There's been a labor supply issue in particular areas for a while. It's one of the reasons companies are going out and trying to adopt technology so that they can make the workforce they have more productive and meet the output demands that they want to achieve."

Daly said that in terms of prime age—25, 26, and all—the U.S. has one of the lowest male labor force participation rates in the industrialized world.

"When you dig into that, it's really about the skills mismatch between our workforce and our jobs. For now, the demand isn't outstripping the supply. It's about where it needs to be, but it will outstrip it down the road if we don't make sure that all of our workers, not just a few of them, have an ability and an interest in coming back into the labor market," said Daly.

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