By Andrew Miller
AI use has continued to rise sharply among service firms and manufacturing.
However, that doesn’t mean employees are being replaced en masse.
Instead, businesses are choosing to retrain, not replace.
More than 60% of service firms now use artificial intelligence in some part of their operations. So do about half of manufacturers. A year ago those figures were 40% and 26%.
The Federal Reserve Bank of New York has surveyed businesses across New York and northern New Jersey about AI every year since 2024, and what’s behind the jump is smaller than the number suggests.
In fact, most firms have barely invested in AI technology.
Three-quarters of service firms and more than 90% of manufacturers describe their AI investment as minimal to modest. That distinction falls somewhere between using free tools and spending a small slice of the budget on AI.
Only about 5% of service firms call it a major strategic investment. Among those using AI, the median share of workers actually touching it is 17% at service firms and 7% at manufacturers.
So the rise isn’t entire workforces shifting over to AI. It’s a smaller subset of workers using the technology more, at companies that haven’t bet much on it.
Over a third of service firms and more than a fifth of manufacturers taught existing employees how to use chatbots and generative tools, automate routine tasks, write better prompts, and check AI’s output for errors and bias.
Some of that guidance reaches workers already using AI, while also bringing in people who haven’t adopted the technology yet. It’s a key part of why small businesses are focusing on training, not turnover.
The layoffs that were supposed to follow AI adoption mostly haven’t materialized, at least by the firms’ own accounting.
Four percent of service firms said they cut staff because of AI over the past six months, up from 1% a year earlier. No manufacturers reported AI-related layoffs. About 15% of service firms hired fewer people than planned, while 13% added workers to help put AI to use.
A separate study from Stanford raises one flag the NY Fed survey doesn’t.
Entry-level workers may be hit harder than experienced workers as AI adoption spreads.
That’s because AI can already do the kind of work new hires start on. The tasks that take experience are harder to hand off, so those jobs have held up.
P.S. Retraining, new tools, staying competitive. None of it happens without capital. Let’s talk about your funding.