The Federal Reserve states that the labor market has come to a standstill

The Federal Reserve, the U.S. central bank tasked with creating the conditions for full employment and price stability, has released a survey that paints a complex picture of the current labor market.

On Wednesday, the Federal Reserve unveiled the survey, which suggests that American companies are putting brakes on hiring. Seven out of twelve districts reported that businesses are hesitant to hire due to weaker demand or uncertainty, according to the survey. This hesitation is reflected in the previous employment report, which painted a negative picture, angering President Donald Trump.

However, not all news is gloomy. A majority of Federal Reserve districts report an increase in the number of people seeking employment. This trend is particularly noticeable in the New York Federal Reserve district, where, in recent weeks, companies have increasingly automated work processes using AI. About 40% of service firms and 26% of manufacturers have adopted AI technologies, leading to modest effects on employment, mostly involving retraining rather than significant layoffs.

Yet, two districts have reported an increase in layoffs, according to the survey. This could be a consequence of the tightening of immigration policies, creating tensions in the construction sector, as reported by the Federal Reserve districts in the "Beige Book."

The survey also reveals that President Donald Trump's increased tariffs since January have caused uncertainty among economic decision-makers. This uncertainty is reflected in the anticipation of more job cuts as AI integration continues and the fear of post-COVID-19 inflation affecting consumers.

Investors expect a modest number of job creations (75,000) and a slight increase in the unemployment rate to 4.3% for August, when the official employment figures for the U.S. will be released on Friday.

President Trump's actions, such as firing the head of the statistics department after the previous employment report and tightening the screws on illegal immigration, have added to the complexity of the labor market situation. Businesses are preferring natural attrition to reduce payroll, a strategy that may have long-term implications for employment rates.

The health of the labor market is a crucial issue for the Federal Reserve. As companies automate tasks, including through new AI tools, the bank will need to navigate these changes to ensure the stability and growth of the U.S. economy.