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From the impact of tariffs to the growing use of artificial intelligence, John Williams views uncertainty surrounding the U.S. economy with cautious optimism.
The New York Federal Reserve Bank president and CEO visited here Monday as part of a trip to Rochester and Syracuse. He spoke with students in a moderated discussion at Rochester Institute of Technology on the outlook for the national economy, including Rochester and Upstate New York. Williams also spoke with the Rochester Beacon.
The New York Federal Reserve Bank oversees New York, Northern New Jersey, Connecticut’s Fairfield County, Puerto Rico, and the United States Virgin Islands. With over $6 trillion in portfolio assets, Williams describes much of his role as gaining a better understanding of his district through various trips for face-to-face meetings—whether it be local government officials and economic leaders, or international central banks.
“What’s really striking about that part of my responsibility is that central banks around the world, nearly all central banks in major economies, are independent of their governments in a way. They’re able to carry out their monetary policy actions without direct influence by elected officials,” said Williams. “We’re a part of the broader government in the sense that the Federal Reserve and other central banks were created by governments to serve the public interest, but we’re able to have our policy meetings and our decisions without government interference with that.”
The nation’s Federal Reserve bank became controversial in the years post-COVID-19, with its unprecedented adjustments to interest rates as a result of shifts in inflation. In 2020, when the pandemic struck, interest rates were cut to near zero, before increasing more than 5 percentage points leading up to 2024. September saw the first cut to the federal funds rate, the Fed’s benchmark interest rate, since a year ago, a move that came in response to signs of a softening labor market.
Williams said the challenges that remain following the pandemic fall in balancing both reductions in inflation and maintaining employment. While inflation has continued to decrease, he says, there have been signals that predict a softening of the labor market.
“I think the most important thing is we need to be driven by the data,” Williams said. “We’ve got to watch the inflation data, employment data, and all the millions of types of data, including the conversations I’m having today and tomorrow with leaders around Rochester and Syracuse to understand, ‘How is the economy likely to evolve over the next year or two?’ And then what are some of the risks of that?'”
When asked about the impact tariffs have had on both national and regional economies, Williams expressed some uncertainty—it is hard to know exactly how tariffs are affecting goods and services in the face of a complex economy.
“I think the economy has recovered from the pandemic. Things were in pretty good shape,” explained Williams. “Now people (and businesses) are (saying), ‘Now I have to figure out how to manage through some of the tariff effects.'”
The New York Fed’s May survey of businesses in the New York and Northern New Jersey region indicated nearly a third of manufacturers and 45 percent of service firms are managing tariff-related cost increases by increasing prices, placing the burden on the consumer.
“With the uncertainty, you’re not quite sure what’s going to happen next. And you have to take a bit of a wait-and-see (on) how things turn out.” Williams said. “I think that’s one of the reasons we’re seeing, even in the regional economy, maybe a slowing down of some decision-making about hiring or doing some investments.”
Williams also spoke about the ways artificial intelligence has shaped the labor market, in response to a Stanford study that found substantial declines in employment for early-career workers in fields most influenced by AI, including software development and customer support.
“Back in the ‘80s and ‘90s and after that, we had a wave of technological innovation in the U.S. and other countries around using computers and later the internet that had fundamentally transformed the productive capacity of our economy,” he said. “The tech boom was real. It showed up in the macroeconomic data. It showed up in productivity. It also, along with globalization and other factors, had profound effects on the distribution of jobs and pay in the U.S. economy.”
He expects AI to have a similar effect, pointing to the impact of computers and information technology.
“It not only made us more productive, but it created new industries that didn’t exist. It transformed how people did things,” Williams said.
With New York investing heavily in the infrastructure required for AI—including more than $124 billion in new semiconductor investments across the state since 2022, and Empire AI, a statewide consortium leveraging a $275 million investment toward an AI computing center at the University at Buffalo—Williams believes that further adoption of the technology would result in short-term demand for skilled labor.
“I think that the first stage, interestingly, is going to be a higher demand for skilled trades, not necessarily PhDs, but for people who (have) those talents and skills to do that,” he said. “The second (stage) is just increased demand for people who are the experts in some of these fields, whether it’s in engineering, technology (or) things like that. … It’s a big increase in investment demand, which has been going on for a few years now, but it really seems to be picking up pretty dramatically.”
Despite such increases in investment, however, Rochester’s private-sector employment has yet to return to pre-pandemic levels, in contrast to the nation’s recovery in 2022. Williams nonetheless remains optimistic that opportunities in high-paying fields would incentivize growth over the long run.
“I think a lot of the efforts in the last few years and right now are to try to make this region, not just in the Rochester area, but the broader parts of New York, to really be a center of high-paying jobs in technology and other areas. We’ve seen this in the Albany area (and) we’re seeing it here,” he said. “It’s incumbent (on) creating reasons for people to come here. And the reason that people come to places often is because there’s really good jobs and really good opportunities.”
In discussing the regional economies of Upstate New York, Williams focused on two key aspects: the opportunities for individuals to live and work in the area, and the costs that housing would impose, not just on individuals, but on businesses looking to attract labor.
“The cost of availability and the cost of housing, whether for lower- or moderate-income families or for anybody, has been a big constraint on businesses’ minds,” Williams explained. “The housing issue is just everywhere in New York.”
Before speaking at RIT, Williams began his visit to Rochester at the Sibley Building to discuss redevelopment and economic conditions with local officials, followed by a presentation on developments in the optics, photonics, and imaging industry to local business leaders. His agenda in Rochester concluded with conversations on housing, workforce development, and transportation with local community development leaders, before he travels to Syracuse today.
Narm Nathan is a Rochester Beacon contributing writer and a member of the Oasis Project’s inaugural cohort.
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