Fed’s Paulson Warns AI Hype Masks Economic Weakness

Philadelphia Fed President Anna Paulson delivered a cautionary note at the National Association for Business Economics Annual Meeting, highlighting how AI enthusiasm is papering over cracks in the labor market and broader economy. The stock market's narrow reliance on AI-driven gains—concentrated among high-income households that own 85% of corporate equity—creates fragile foundations for growth.

"The relatively narrow base of support for the labor market, combined with the prominence of the AI narrative for equities, suggests limited near-term economic resilience," Paulson stated. While acknowledging AI's long-term productivity potential, she warned business leaders are already questioning demand sustainability.

The remarks reinforce the Fed's cautious policy stance, balancing AI's transformative promise against mounting macroeconomic risks. No direct cryptocurrency implications emerged, though the commentary on speculative tech narratives carries indirect relevance for digital asset markets.