SF Fed Reserve Chief Daly says A.I. replaces tasks, not people

Mary Daly, who oversees a Federal Reserve bank region that includes Silicon Valley among its nine Western states, weighed in on the state of the labor market on Monday at the Fortune Brainstorm Tech conference, but declined to give a hint on when the next rate cut may come.

In a wide-ranging on stage interview in Deer Valley, Utah, Daly said that the tech sector is still in the midst of an upward trajectory “because it’s bringing us all kinds of new things. It helps us do better business, better at how we live, making the world a better place.”

The U.S. labor market, which has been tight since 2021, is now softening, Daly said. The U.S. unemployment rate reached 4.1% in June, a two-and-a-half year high, according to the Bureau of Labor Statistics. Firms are looking for ways to meet demand and do things more quickly. She spoke of Honeywell which had a labor shortage and used AI to augment its workforce as opposed to replacing its workers. 

“They were replacing tasks not people and people were getting oriented to do other things,” Daly said to an audience filled with venture capitalists and tech entrepreneurs. 

“No tech in the history of all technology has reduced employment, not net,” she added.

The Federal Reserve has also been expected to cut interest rates this year at least once but has yet to do it. Inflation has remained stubborn which has made the Fed leery of cutting rates, according to CBS News.  Daly said she expects a “policy adjustment over next coming terms,” but wouldn’t give a hint on how many rate cuts might come or when. 

Daly was also questioned on how rate cuts might impact the valuations of booming technology companies like Nvidia. The chip company currently has a market cap of $3.16 trillion. Valuations of tech companies move around in ways that are not always tied to the economy, she said. “How a change in interest rates will affect valuations isn’t clear,” Daly said. 

When asked about Donald Trump’s anticipated return to the White House, Daly was also circumspect. The Fed is charged by Congress to remain independent even if it is faced with a presidential administration that is hostile, Daly said. The Fed’s most important asset is its integrity, while its most important tool is the trust of the people, she said. “The American people are our shareholders. We have to earn their trust and respect by [doing] great work,” she said.