US FOMC Member Cook Speaks

Thank you, Dean Logue. It is wonderful to be back in my adopted home state of Michigan and on the University of Michigan's beautiful campus. The fact that you got this Georgia native to visit in the first week of January shows you just how much I love it here. But, seriously, the program committee for the University of Michigan Law School's Seventh Conference on Law and Macroeconomics has put together an impressive program. I am grateful for the opportunity to present my views and to learn from all of you.1 Today, I would like to speak about the Federal Reserve Board's work on financial stability. It is a topic that holds special importance to me, because I am the chair of the Board of Governors' Committee on Financial Stability. But before speaking on financial stability, given that it is the beginning of a new year, I thought it would be helpful to share my economic outlook and my views on appropriate monetary policy. Overall, the U.S. economy starts the year in good shape. Economic growth was quite strong in 2024. Inflation has fallen considerably from its peak two and a half years ago, though it remains somewhat above the Fed's 2 percent objective. The labor market is solid, with the unemployment rate still relatively low and Americans, on average, bringing home paychecks that are growing faster than inflation. My focus, and that of my colleagues on the Federal Open Market Committee (FOMC), is on our dual-mandate goals of price stability and maximum employment. This year, I will continue to work on calibrating monetary policy to ensure inflation returns sustainably to our 2 percent target while maintaining a solid labor market. I will also carefully monitor financial stability risks and vulnerabilities and work with my colleagues at the post: FED'S COOK: RISKS TO INFLATION AND EMPLOYMENT ARE ROUGHLY IN BALANCE. post: FED'S COOK: IT WILL BE APPROPRIATE TO CUT TOWARD NEUTRAL OVER TIME. post: FED’S COOK: OFFICIALS CAN BE MORE CAUTIOUS WITH FURTHER CUTS GIVEN LABOR MARKET RESILIENCE, STICKIER INFLATION

Thank you, Christa. It is wonderful to be with you here on the University of Virginia's beautiful campus. This is my first visit here as an adult. As a child, I was fortunate enough to be able to attend the commencement ceremony of my aunt and uncle, who received their doctoral degrees from UVA several decades ago. My family and I are grateful to the University of Virginia for all the educational opportunities it has afforded us over the years. I look forward to connecting with many of the exceptional students and faculty during my visit. As a member of the Federal Reserve Board, I always find it a pleasure to hear from people in communities across the country and to share some views of my own. At the Fed, I am committed to pursuing the best policy to achieve the dual-mandate goals given to us by Congress of maximum employment and price stability. Today, I would like to share with you my outlook for the economy, including some international comparisons of productivity and inflation, and offer my views on U.S. monetary policy. Broadly, I view the economy as being in a good position. Inflation has substantially eased from its peak in mid-2022, though core inflation remains somewhat elevated. Unemployment remains historically low, but the labor market is no longer overheated. Economic growth has been robust this year, and I forecast the expansion will continue. Looking ahead, I remain confident that inflation is moving sustainably toward our 2 percent objective, even if the path is occasionally bumpy. Meanwhile, I see employment risks as weighted to the downside, but those risks appear to have diminished somewhat in recent months. Inflation Inflation, as measured by the personal consumption expenditures (PCE) price index, has eased notably from a peak of 7.2 percent in June 2022. Estimates based on the consumer price index and other data released last week indicate that total PCE prices rose 2.3 percent over the 12 months ending in October. Core PCE prices—which exclude the volatile food and energy categories—increased 2.8 percent, down from a peak of 5.6 percent in Feb post: FED'S COOK: IF THE LABOR MARKET AND INFLATION EVOLVE AS EXPECTED, IT WOULD BE APPROPRIATE TO CONTINUE LOWERING THE POLICY RATE TOWARDS NEUTRAL. post: FED'S COOK: CUTS SO FAR WERE A STRONG STEP TOWARD REMOVING POLICY RESTRICTION. post: FED'S COOK: ECONOMIC GROWTH IS ROBUST, I EXPECT EXPANSION WILL CONTINUE. post: FED'S COOK: THE MAGNITUDE AND TIMING OF RATE CUTS WILL DEPEND ON COMING DATA, THE OUTLOOK, AND THE BALANCE OF RISKS. POLICY IS NOT PRESET.

Thank you for the kind introduction, Jennet. Let me start by saying my thoughts are with all the people in Florida, Georgia, North Carolina, South Carolina, Tennessee and Virginia who have felt the force of Helene's and Milton's impact. I am saddened by the tragic loss of life and widespread disruption in this region. The Federal Reserve Board and other federal and state financial regulatory agencies are working with banks and credit unions in the affected area. As we normally do in these unfortunate situations, we are encouraging institutions operating in the affected areas to meet the needs of their communities. It is an honor to stand before you and speak to this group of audacious, innovative women. I am also very happy to be back in Charleston. I grew up in Milledgeville, Georgia, just about 250 miles down the road. Some of my fondest childhood memories of traveling in the South, especially as a Girl Scout, include South Carolina. post: FED'S COOK DOES NOT COMMENT ON ECONOMIC OR MONETARY POLICY OUTLOOK IN PREPARED REMARKS AT EVENT IN SOUTH CAROLINA.

I am grateful for the educational opportunities this university has afforded my family over the years, including my uncle Samuel DuBois Cook who received his M.A. and Ph.D. here in 1950 and 1953. I am delighted to be here! Today, I would like to discuss the implications of artificial intelligence (AI) for workers and the labor market, more generally.1 I will discuss AI's potential to boost productivity, offer a framework to consider which jobs will be most affected by AI, and consider AI's effect on aggregate employment. I hope this discussion will be informative for many of you in the audience, especially those of you who will be entering the job market in the next few years. However, before discussing AI, I think it will be helpful to first set the stage by reviewing how the labor market has evolved in recent years and where it is today. View of the Labor Market On the eve of the pandemic, the labor market was quite strong. The unemployment rate was flirting with historical lows, having fallen to 3.5 percent in the fall of 2019 from an average of 4.7 percent between 2014 and 2019. Jobs were relatively plentiful, with 12 openings for every 10 unemployed job seekers. Then, the labor market changed dramatically in the first few months of the pandemic when economies around the world shut down. By April 2020, nearly one out of every seven U.S. workers was unemployed. The U.S. labor market lost more than 20 million jobs in just two months. To put that into perspective, that is nearly four times the total number of jobs in Ohio. U.S. workers and employers, with the support of timely and extraordinary policy action, proved to be resilient and innovative. As we know from the National Bureau of Economic Research's Business Cycle Datin post: FED'S COOK: LABOR MARKET 'SOLID' BUT HAS COOLED NOTICEABLY; MAY BECOME MORE DIFFICULT FOR SOME TO FIND EMPLOYMENT post: FED'S COOK: SEES SIGNIFICANT EASING IN INFLATIONARY PRESSURE post: FED'S COOK: UPSIDE RISKS TO INFLATION HAVE DIMINISHED; DOWNSIDE RISKS TO EMPLOYMENT HAVE INCREASED

post: FED'S COOK: **OPTIMISTIC AI CAN BOOST PRODUCTIVITY **AI HAS POTENTIAL FOR NEGATIVE EMPLOYMENT IMPACTS **DOES NOT ADDRESS MONETARY POLICY OR ECONOMIC OUTLOOK IN OPENING REMARKS AT AI-FOCUSED CONFERENCE