Chicago Fed's Goolsbee sees AI data center boom crowding out other sectors

September 2, 2026 at 12:00 PM2 min

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Chicago Fed President Austan Goolsbee said the AI data center boom is crowding out other sectors by competing for construction workers and resources. He warned the economy is not far from aggregate overheating, even as consumer spending keeps growth stable.

Key Facts

Goolsbee said the data center expansion is 'very hot' but is largely shoving other parts of the economy down.
Businesses in the Chicago Fed's 7th district report scaling back plans because construction workers are too expensive and HVAC is unavailable.
Goolsbee said the Fed is 'not far from that turning into aggregate overheating' if data center buildouts push up services inflation.
Goolsbee was comfortable holding the base rate at the July FOMC meeting because CPI fell 0.4% in June and was flat at 0.1% in July.
Goolsbee said unexpected AI productivity gains would lower inflation and allow rates to go down.

Data Center Crowding Out

Goolsbee characterized the expansion of AI data centers as 'very hot' but said it is largely shoving other parts of the economy down. He said the rise has been stepping on other sectors that are competing for the same resources. During tours of the Chicago Fed's 7th district, business owners told him they are scaling back plans because construction workers are too expensive and HVAC equipment is unavailable. Goolsbee said this implies a sector rebalance rather than aggregate overheating, but added, 'we're not far from that turning into aggregate overheating.'

Inflation and Rate Outlook

Goolsbee said the employment side of the Fed's mandate looks relatively stable across the unemployment rate, vacancy rate, hiring rate, and layoff rate. He attributed the economy's stability to broad-based consumer spending growth, not AI data centers. Goolsbee said he was comfortable holding the base rate at the July FOMC meeting because the all-items CPI reading fell 0.4% in June and was flat at 0.1% in July. He said if data center buildouts push up services inflation, 'that would make me more nervous.' Goolsbee said if AI productivity lands in an unexpected way, inflation goes down and rates can go down.