Fed’s Schmid tells Albuquerque leaders AI could ‘bolster’ workforce

The nation’s labor market is in the midst of long-term transformation — and central banker Jeffrey Schmid expects artificial intelligence to play a significant role in shaping the road ahead.

“We’re going through this structural change,” Schmid said, “and I would argue that we’re going to actually need elements of AI to bolster the lower workforce numbers as we go forward.”

AI’s role in the workforce was one of several insights Schmid, president and chief executive officer of the Federal Reserve Bank of Kansas City, shared with local business leaders at the Albuquerque Museum on Wednesday during an Economic Forum of Albuquerque meeting.

It was Schmid’s first time speaking at the event, which gathers some of the state’s most influential business leaders.

The meeting coincided with the Labor Department’s Wednesday release of January’s jobs report, which said that U.S. employers added 130,000 jobs to the market last month — a number stronger than economists expected. January’s labor force participation rate of 62.5% changed little, sitting far below pre-pandemic levels.

Much of the January job growth came from the health care sector, which accounted for more than 60% of last month’s new jobs. Schmid said the growth in health care could be due to increased baby boomer retirements, which may be increasing demand for health care services.

The unexpected influx of jobs follows months of slower job growth, which Schmid and several economists in part attribute to demographic shifts, including a tougher immigration policy implemented by the Trump administration. Collectively, retirements and immigration policy contribute to 400,000 jobs leaving the market per month, Schmid said.

Decreased birth rates are also expected to have some long-term effects — slowing down the “pipeline of people into the workforce” — and not just for the U.S., Schmid said. China’s population could reduce to half of what it is today 74 years from now, according to a United Nations report.

Schmid said these changes beg the question, “What are the jobs of the future?”

“We’re going to have to start aligning our education systems (and) our skills training to what people are going to need to be skilled to do apart from what they’re doing today,” Schmid said.

Schmid entered the top role at the Kansas City Fed in 2023, after years of building banks and businesses. Schmid represents the Tenth Federal Reserve District — including Colorado, Kansas, Nebraska, Wyoming, western Missouri and northern New Mexico — on the Federal Open Market Committee, which sets the U.S’s monetary policy.

The committee is responsible for maintaining maximum employment and stabilizing prices to keep inflation capped at 2%. It does so through a variety of tools, including controlling how much banks can lend and setting interest rates.

The Fed lowered interest rates three times in 2025, a year during which Schmid had a voting seat. Schmid — who does not have a vote this year — voted against two of the cuts, citing concerns about inflation.

“I believe that inflation is an economic thief, and it can be most insidious to the lower half of our earners,” Schmid said.

When interest rates are lowered, people often spend and borrow more money, which increases demand and can prompt businesses to raise prices. The Fed will sometimes raise rates to cool demand and drive inflation down. The personal consumption expenditures price index, the Fed’s preferred measure of inflation, rose 2.8% through November, according to the latest federal data.

“The difference between 2 and 3% in a $30 trillion economy is it’s robbing you of somewhere in the neighborhood of $200 to $400 billion of purchasing power annually,” Schmid said. 

In December, the Fed projected just one potential rate cut in 2026, but Schmid said the future is hard to predict because the central bank makes decisions in real time in response to newly released data. 

January’s jobs report included revisions that reduced the number of jobs created last year to 181,000, versus the 584,000 previously reported by the Bureau of Labor Statistics. President Donald Trump fired the bureau’s commissioner in August, alleging data manipulation after mid-2025 reports showed slower hiring. He tapped White House economist Brett Matsumoto to lead the bureau in January, though that appointment is still subject to Senate confirmation.

Banking on the advantages AI could have on data collection, Schmid said he’s “actually optimistic” that the bureau will see fewer revisions in the future. 

In his Wednesday presentation, Schmid also touched on the importance of the Fed’s ability to act independently in the face of external factors and political pressures — including Trump’s criticisms of Fed Chairman Jerome Powell, whose term ends in May. Schmid said he has “zero concerns” about Trump’s nominee to replace Powell, Kevin Marsh.

“I will miss (Jerome) Powell. From the very first moment I met him back in 2023, I considered him a principled, committed American,” Schmid said. “I think the nature of the job is complex. It's difficult, but I also believe that these things — here again, we're 250 years as a country — they’ll work themselves out.”

Schmid maintained that he is optimistic about the economy’s direction and touted tourism and Route 66 ties in Albuquerque — one of the largest cities in the region that the Federal Reserve Bank of Kansas City oversees — as a strength for the area.

“The economy enters 2026 with considerable momentum,” Schmid said, highlighting the nation’s productivity growth, consumer spending resiliency and AI-related investments. “... I am hopeful that the economy will outperform again this year.”

Kylie Garcia covers retail and real estate for the Journal. You can reach her at kgarcia@abqjournal.com.