Economic slowdown, not automation, driving most layoffs
A growing number of CEOs have warned that artificial intelligence will upend white-collar work, but recent data shows that the actual impact on hiring and job losses remains far more modest than the headlines suggest.
According to the latest report by Challenger, Gray & Christmas, only 75 of the 286,679 planned U.S. layoffs this year have been explicitly tied to AI. Most job losses are still attributed to Trump administration budget cuts, economic uncertainty, and market conditions—especially in government and nonprofit sectors heavily reliant on federal funding.
“Far less is happening than people imagine,” said Andrew Challenger, senior VP at the consultancy. “AI is changing roles, but it’s not eliminating them en masse.”
Executives raise alarms, but data tells another story
Despite the data, prominent business leaders continue to sound the alarm. Amazon CEO Andy Jassy has warned that AI will eventually reduce Amazon’s corporate headcount. Ford CEO Jim Farley echoed similar views, though later reports clarified he was quoting another executive’s projection. And companies like Shopify and Duolingo are already requiring teams to justify hiring requests by proving the work can’t be done with AI tools.
Still, most businesses are not yet replacing workers. Instead, they are freezing hiring and diverting budgets toward AI software amid pressure to cut costs. Josh Bersin, CEO of The Josh Bersin Company, noted that executives often say: “No more hiring. Just stop.”
Big Tech is realigning, not fully automating
Even among AI’s leading developers, job losses are tied less to AI replacing workers and more to shifting priorities. Microsoft, for example, has cut around 15,000 roles this year, many in software engineering. CEO Satya Nadella said AI now writes up to 30% of the company’s code, yet analysts believe the layoffs are also about offsetting the $80 billion investment in AI infrastructure.
“We believe Microsoft would need to reduce headcount by at least 10,000 annually to fund its AI buildout,” said Gil Luria of D.A. Davidson. Meanwhile, IBM has replaced hundreds of HR staff with AI, but then hired more programmers and salespeople.
AI shifts roles, but doesn’t erase them
AI is indeed transforming how work is done. Hiring and recruiting are increasingly automated. Developers’ roles are evolving rapidly. Yet full job displacement remains rare. “There’s not evidence that it’s fully replacing whole workers,” said Svenja Gudell, chief economist at Indeed Hiring Lab. “AI changes jobs more than it kills them.”
As companies experiment with automation, the bigger driver of the current labor slowdown remains Trump’s economic policies—particularly tariffs and government cuts—more than any AI revolution. For now, economic headwinds are doing more to reshape the labor market than machines.
