This post is Part 3 of NLC’s Local Economic Futures Forum Blog Series.
In Part 2 of this series, we looked at how aging populations and youth outmigration are reshaping the fiscal foundation of America’s cities. Our newest post, Part 3, turns to the second mega-trend city leaders wrestled with at the Local Economic Futures Forum: technology and automation.
Cities are actively helping entrepreneurs and workers modernize, with many crediting their local community colleges as essential partners. At the same time, a striking number are running their own internal operations on decade-old systems, often without a clear, community-informed policy guiding how AI gets used.
A Current Landscape Scan
Before diving into what cities said, it is worth pausing to reflect on recent artificial intelligence (AI) research, since AI dominated this portion of the conversation. According to the Stanford Institute for Economic Policy Research (SIEPR), AI’s effect on overall employment is modest. Workers in the most AI-exposed occupations are not losing jobs at higher rates than those least exposed, and firms that adopted enterprise AI actually saw employment grow by 10 percent in the two years following implementation. Economists are also skeptical of companies that cite AI in layoff announcements, noting these decisions more often reflect post-pandemic over-hiring than direct displacement.
The picture is more nuanced for younger workers, however. Research finds a decline in employment among early-career workers in AI-exposed occupations, including software developers and customer service representatives. As we discussed in this previous series’ blog, this is a trend cities prioritizing youth retention should watch closely.
At the same time, AI appears to be spurring entrepreneurship. According to the Census Bureau, Americans filed 5.7 million applications to start new businesses in 2025, the most in its two decades of tracking. A recent New York Times article attributes much of this growth to AI tools that are lowering the barriers to starting a business, allowing individuals to launch and operate with less capital and fewer employees than previously required.
Where Cities Feel Ready
City leaders were candid about where they feel momentum. Several participants named “established tech clusters,” “business-friendly regulatory climates” and “local employers adding technology roles to existing workforces.” Buffalo, N.Y. points to its robust entrepreneurial ecosystem as a built-in advantage for tackling municipal challenges, while Wilmington, Del. credits its state’s business-friendly reputation as a head start to welcoming innovation.
Community colleges come up repeatedly as trusted workforce partners. Cities describe using them to drive conversations about what residents need to be trained for and to deliver hands-on AI literacy at the community level. Several leaders also note that existing broadband infrastructure give them a foundation to build on.
Where Cities Notice a Gap
Leaders were equally direct about where they feel exposed. A citywide AI policy was the most named absence. One leader admitted they have no clear sense of how their city is using AI, or for which programs. Others pointed to broadband gaps in parts of their community that undercut any broader conversation about equitable AI adoption.
Misalignment between higher education and the job market is another trend. Leaders described graduates credentialed for roles that do not exist locally, while gaps go unfilled in sectors like biotech, healthcare and manufacturing. Concerns about hybrid work’s downstream effects on downtown corridors also surfaced, a reminder that technology-driven shifts in how people work ripple into local economies in ways that are not always initially visible.
Layoff fears are present too, though the Stanford research suggests that fear may be outpacing reality. What the data does point to is AI quietly reshaping roles and entry-level hiring in some sectors.
For economic development teams, this creates a specific, near-term opportunity. If AI is contributing to a surge in new business formation, cities may soon see an influx of people starting businesses for the first time. Those entrepreneurs may have AI helping them draft a business plan, but they still need to know where to get a business license, how to access local lending and what technical assistance programs exist in their community. This is a good moment to make sure those resources are updated, visible and accessible.
96 percent of mayors report interest in using AI, yet only 10 percent have assigned AI personnel and just 9 percent of local governments have formal AI policies in place. 38 percent of technology leaders say their organizations are not prepared to safely and effectively use AI.
What Cities Are Asking NLC For
Forum participants helped make this clear — cities want best practices for deploying AI responsibly in both government operations and small business support. They want curated resources they can hand to local businesses rather than building those lists from scratch. And they want NLC to keep convening these conversations.
Some of this is already underway. NLC’s AI and Emerging Technology Forum is a national working group of local leaders and technology staff that evaluates AI tools, identifies shared challenges and develops practical governance frameworks. For cities beginning this work, a few grounding questions can clarify the path: What specific problem is the city trying to solve through AI? How does that effort fit within existing leadership and decision-making structures? And what guardrails are needed to make sure AI use stays aligned with community values?
A small number of cities, including Seattle and Louisville, have created Chief AI Officer roles to coordinate this work. Most cities are not there yet, and do not need to be. Auditing existing data assets, building training partnerships and identifying what a city can reasonably invest are all meaningful first steps that can happen well before a new title appears on the org chart.
The technology and automation shifts discussed are indeed underway, but their effects are not uniform nor inevitable. Cities that stay curious and stay realistic will be better positioned to shape what it means locally.
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