Some Philly-area firms say AI is replacing workers or changing their jobs

AI has already replaced some workers at Philly-area firms, a new report says. But the bulk of the AI-related job loss is yet to come, the Federal Reserve Bank of Philadelphia CEO and president Anna Paulson said.

Paulson, speaking Wednesday at the Chamber of Commerce for Greater Philadelphia’s State of the Economy event, said AI could further reduce demand for workers in the years ahead.

Also Wednesday, the Fed released its annual report, which surveyed 54 Chamber businesses on the past year and what lies ahead. They found that the biggest concern area businesses faced in 2025 were uncertainty about regulations and government policies, and that nearly 39% of respondents expected better business conditions overall in this coming year.

Amid a slow labor market, a central topic of Wednesday’s event was jobs.

Last year, the majority of private-sector jobs created were in healthcare and social assistance, Paulson noted. Philadelphia has a larger-than-average share of workers in this sector, which means the region has “been somewhat insulated from the national slowdown in job creation,” she said.

But in other sectors, AI and immigration trends have contributed to a hiring slowdown.

“On the supply side, the sharp drop in immigration has slowed the growth of labor supply,” said Paulson. “On the demand side, firms — both nationally and here in Philadelphia — tell us that uncertainty is holding back hiring as they consider a range of factors: trade policy and the potential for artificial intelligence to transform the need for workers.”

AI has been widely adopted by companies in the region, the Chamber’s survey found. Nearly 76% of respondents said they used AI for their work.

That’s changing what kinds of human work firms need.

Among those surveyed, 9.5% said generative AI had decreased the need for workers at their firm, while 23.8% said it changed the kinds of workers they needed but not the number.

Only 4.8% reported needing more workers because of generative AI.

The AI boom has brought plans for more data center development in the region. But those kinds of facilities don’t require a lot of workers, says Paulson.

“Going forward, we can see a period of strong growth where relatively few jobs are created as AI becomes fully embedded,” she said.

As uncertainty slows hiring on the business side, it seems to be influencing consumer trends as well.

Paulson noted that low-income households are struggling due to high prices and worries around job security.

Individuals with discretionary income are being careful of how they spend their money, noted Paulson. “A retailer who is active in the Philadelphia area told us they are seeing a lot of headwinds for the consumer, especially for lower-income individuals,” she said.

While people in Philadelphia continue to eat at restaurants, “contacts tell us that less expensive options on the menu are becoming more popular,” she said. Upscale restaurants are an exception, she noted, adding that “high-income households, bolstered by a strong stock market, appear to be driving elevated consumption growth.”

When they are hiring, companies are often challenged to find the right candidates. About 30% of employers surveyed struggled to hire last year because they lacked applicants, or lacked qualified applicants, the Chamber’s report said.

Comcast executive Bret Perkins, who leads the company’s external and government affairs, noted at Wednesday’s event that the Philadelphia area is “just not creating enough opportunity jobs,” that lend workers upward mobility. He pointed to Philadelphia ranking 50th among 50 metro areas for upward economic mobility recently.

The Philadelphia Fed recently partnered on a survey of Philadelphians in the city’s lower-income zip codes, in which roughly one-third said “a better-paying job is the single thing that would be most helpful to them,” said Paulson.

But getting that job is a challenge, Paulson said. Health, caretaking responsibilities, and reliable transportation are among the barriers these Philadelphians are facing, the survey found.