Fed's Goolsbee: Even without AI, the economy would not be in recession

As artificial intelligence develops at a blistering pace, boosting parts of the economy, both industry leaders and watchdogs argue it should be slowed down to ensure the technology is developed safely.

But what would that mean for economic growth? Would the economy be as strong without AI?

Chicago Federal Reserve president Austan Goolsbee argues that the AI boom isn't simply adding to economic growth; it is actively cannibalizing resources from other traditional industries.

"You can't just look at the rest of the economy and say that's how it would be doing if the AI build-out wasn't there," Goolsbee said in an interview with Yahoo Finance. "Part of why I haven't thought until recently that AI was overheating the aggregate economy is that it's kind of uncomfortably shoving down other sectors."

Goolsbee said he's seeing this play out in his Midwestern district, where local businesses are increasingly complaining about skyrocketing costs, driven directly by intense competition with tech giants.

"A lot of it is we're in competition for the same resources, the same electricians, the same components, the same land, the same construction," Goolsbee said.

Since AI's rise has suppressed other sectors, the aggregate economy has managed to avoid boiling over. A sudden slowdown in AI wouldn't automatically trigger a recession, Goolsbee said, because if tech demand were to cool, it could simply release pent-up capacity and allow sidelined industries to recover.

However, Goolsbee warned that the velocity of the AI build-out is starting to boost growth more widely.

"The growth has been so rapid that now you're starting to see a retightening of the labor market," Goolsbee cautioned. "Now it becomes more of a concern of just the old-fashioned overheated demand kind of variety."

Jennifer Schonberger is a veteran financial journalist covering markets, the economy, and investing. At Yahoo Finance, she covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram .