AI Could Raise US Unemployment Rate Slightly in 2026, Goldman Sachs and Fed Warn

Goldman Sachs and the Federal Reserve have warned that artificial intelligence could raise the U.S. unemployment rate in 2026. Pierfrancesco Mei, an economist at Goldman Sachs, notes that job growth in AI-ready industries has slowed and turned negative. The firm forecasts a potential rise in unemployment from 4.3% to 4.5% by year-end.

Federal Reserve Governor Lisa Cook echoed similar concerns, stating AI is triggering a generational shift in the U.S. labor market. She warns that job displacement could precede job creation in the early stages of AI adoption, leading to a possible rise in unemployment.

Cook also emphasized the limitations of traditional monetary policy in addressing these changes. She suggested that education and workforce development may be better suited to mitigate the risks of AI-driven labor displacement.

Why Is AI Expected to Impact Unemployment?

Goldman Sachs research highlights how AI is replacing human labor in certain industries. Mei predicts that faster AI adoption could increase unemployment by 0.3 percentage points in 2026. This could be particularly pronounced in sectors where automation is already underway.

A different perspective comes from Citadel Securities, which argues that AI-driven labor displacement is unlikely to overwhelm the economy. The firm notes that AI deployment follows an S-curve and is subject to economic, institutional, and physical constraints.

How Are Workforce Dynamics Shifting?

Higher-income workers are showing increased fear of job displacement, leading to reduced turnover in white-collar professions. UBS economist Arend Kapteyn attributes this trend to the perceived higher risk of automation in these roles.

Younger workers are also facing unique challenges in AI-exposed sectors. Employment declines are most acute for those under age 25, while experienced workers are benefiting from AI as a tool to enhance their work.

What Are the Risks for AI-Driven Companies?

C3.ai, a major AI software company, reported a significant revenue decline in Q3 2026. The company announced a 26% workforce reduction and cost-cutting measures in response to weak performance.

The company's restructuring has raised concerns among investors and analysts. C3.ai faces legal risks from a securities-fraud investigation and execution challenges in converting pilot projects into recurring revenue.

What Policy and Market Implications Exist?

Federal Reserve officials are considering non-monetary interventions to address AI-related labor market changes. Bostic, the outgoing Atlanta Fed president, argued that fiscal policy should play a more prominent role in managing labor market transitions.

The broader market reaction to AI-driven displacement is mixed. While some analysts remain optimistic about AI's productivity-enhancing potential, others caution that structural changes may require significant policy responses.

What Do Analysts Expect Moving Forward?

Analysts are closely watching how AI adoption affects employment trends and economic structures. Cook emphasized the need for proactive education and workforce development to address AI-related challenges.

The labor market's ability to absorb AI-driven changes will depend on the pace of adoption and the effectiveness of complementary policies. Investors are advised to monitor both technological progress and policy developments as they evolve.