SouthernWorldwide.com – Artificial intelligence (AI) is increasingly being cited as a reason for job cuts and a dampener on hiring, according to economists. While direct layoffs are occurring, a more subtle impact is emerging through reduced recruitment, particularly for entry-level positions.
Recent weeks have seen significant workforce reductions attributed to AI. Software maker Intuit announced it was cutting 17% of its staff, approximately 3,000 employees, to refocus on AI. Meta also began laying off 8,000 workers, shifting investments towards AI development. Cisco, in a similar move, announced thousands of job cuts, with CEO Chuck Robbins explaining the decision was partly to invest in employees’ use of AI across the company.
Andrew Tran, a product designer at Meta who was among those laid off, expressed his intention to seek employment at companies that use AI purposefully rather than solely for replacing staff. He believes his role wasn’t directly replaced by AI but acknowledges the broader trend of companies adopting the technology.
Tran emphasized that corporations have a responsibility to retrain their workforces rather than dismiss them. He clarified that his comments reflect a general sentiment towards the corporate sector and are not specific to Meta.
Thousands of job cuts
Data from outplacement firm Challenger, Gray & Christmas indicates that nearly 50,000 job cuts this year have been linked to AI. This represents about 17% of the total job cuts announced so far in 2026, which stands at approximately 300,000.
The current wave of layoffs coincides with warnings from analysts that AI could fundamentally alter the labor market. Boston Consulting Group has projected that up to 15% of U.S. jobs could be eliminated within the next five years.
Economists observe that most AI-related layoffs are concentrated in the high-tech industry. They also suggest that companies may not always implement AI as a direct substitute for human labor.
Greg Daco, chief economist at EY-Parthenon, noted that while many layoff announcements cite increased AI use, the primary driver might be reducing labor costs. He added that despite rapid AI investment growth, it’s not definitively a situation where human talent is being replaced by technology.
Some economists argue that AI’s impact on the job market is manifesting less through mass layoffs and more through subdued hiring. Certain companies are pausing recruitment as they assess how AI will affect their staffing needs, potentially creating greater difficulty for younger and entry-level workers to secure employment.
Essentially, these businesses are not reducing their current workforce but are also not expanding it by creating new job opportunities.
Junior workers squeezed
Reduced hiring typically garners less public attention than layoffs, as companies rarely announce such decisions. Research from Goldman Sachs indicates that over the past year, AI has contributed to a reduction in monthly payroll growth by approximately 16,000 jobs, leading to a 0.1 percentage point increase in the unemployment rate.
Daniel Keum, an associate professor of management at Columbia Business School, stated that AI’s impact on the labor market is becoming apparent, primarily through decreased hiring, especially for junior roles, rather than increased layoffs.
Younger workers may face particular hurdles because entry-level positions are generally more susceptible to automation compared to senior roles, according to experts.
Keum highlighted that the most significant impact of AI will likely stem from reduced hiring of junior employees, as senior positions are considerably more challenging to replace.
AI may also lead to a transformation of job requirements, creating new roles that do not necessarily align with the skill sets of workers displaced by automation.
Ken Matos, an organizational psychologist and director of insights at the hiring platform HiBob, explained that individuals who are laid off may not seamlessly transition into new roles because the job responsibilities are different.
However, Matos anticipates a rebound in hiring once companies complete their major AI investments.
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He added that companies are currently reallocating labor budgets towards technological investments, with the expectation that these funds will eventually return to labor once the technology is fully implemented.
Positive spin
Beyond AI, corporations are navigating a complex economic landscape influenced by geopolitical tensions, fluctuating U.S. tariff policies, and other sources of economic uncertainty. These factors could also be contributing to layoffs and dampened hiring.
Daco suggested that framing workforce reductions as part of an AI strategy can present a more favorable image to investors than citing weaker demand or rising costs.
He explained that while general layoff announcements are typically viewed negatively by markets and investors, citing AI as the reason provides a communication advantage.
Clarence Lee, a tech entrepreneur and professor at the Cornell SC Johnson College of Business, believes that attributing job cuts to AI allows companies to simplify a complex situation into an easily digestible message.
Daco noted that currently, only about 10% of firms utilize AI for producing goods and services, and an even smaller subset is actively replacing workers with the technology.
He concluded that while some job displacement is occurring, there is not yet evidence of massive job dislocation directly resulting from AI.
Dan Freedman, a Google software engineer and member of the Alphabet Workers Union, sees a connection between the recent increase in layoffs and the push to adopt AI. However, he does not believe the technology is replacing workers on a one-to-one basis.
Freedman described AI as the latest source of job anxiety that workers must now contend with.
What should workers do?
Experts advise that workers who can combine AI proficiency with adaptability will be best positioned to navigate the evolving labor market.
Matos emphasized that AI is a dynamic field, and employers are increasingly seeking individuals who embrace risk, are motivated by continuous learning, and are engaged by transformation. He views these as personality traits as much as skill sets.
Lee recommends that workers focus on understanding AI capabilities while simultaneously identifying skills that remain uniquely human.
He believes that this synergy is where the true potential lies.
—CBS News’ Mary Cunningham contributed to this story.
