SouthernWorldwide.com – Artificial intelligence (AI) is increasingly linked to job cuts and is also impacting hiring trends, according to economists. While AI-driven layoffs are becoming more visible, a quieter but significant effect is the slowdown in new job creation, particularly for entry-level and junior positions.
Recent weeks have seen several major companies announce substantial workforce reductions, citing AI as a key factor. Enterprise software company Intuit recently laid off 17% of its staff, approximately 3,000 employees, to refocus on AI development. Similarly, Meta began a process of eliminating 8,000 jobs as it redirects investment towards AI initiatives. Cisco also announced thousands of layoffs, with CEO Chuck Robbins stating that headcount reductions were partly to facilitate employees’ use of AI across the company.
Andrew Tran, a product designer at Meta who was among those affected by the recent layoffs, expressed his intention to seek employment at companies that he believes are implementing AI purposefully, rather than solely as a means to replace workers. While Tran does not believe his specific role was directly automated by AI, he acknowledges the widespread corporate adoption of the technology.
“In general, companies should have an obligation to retrain their workforces instead of throwing them to the curb,” Tran told CBS News. He clarified that his remarks were directed at the corporate sector broadly and not specifically at Meta.
Thousands of Job Cuts
Data from outplacement firm Challenger, Gray & Christmas indicates that nearly 50,000 job cuts have been announced this year and are associated with AI. These layoffs constitute about 17% of the total approximately 300,000 job cuts reported in 2026 so far.
This trend comes as some market analysts caution that AI could fundamentally alter the labor market on a much larger scale. Boston Consulting Group has projected that up to 15% of U.S. jobs could be eliminated within the next five years.
Economists observe that the majority of recent AI-related layoffs are concentrated within the high-tech industry. They also note that companies might not always deploy AI as a direct replacement for human labor.
“We are observing numerous layoff announcements that are purportedly linked to increased AI utilization,” stated Greg Daco, chief economist at EY-Parthenon, in an interview with CBS News. “These are intended to reduce labor expenses, while AI investment is escalating rapidly. However, I am not entirely convinced this represents a direct substitution where talent is being replaced by technology.”
A number of economists suggest that AI’s impact on the labor market is manifesting less through widespread layoffs and more through a weakening of hiring momentum. Some companies are postponing recruitment efforts as they assess how AI will influence their staffing requirements. This approach may create greater difficulties for younger workers and those seeking entry-level positions.
Essentially, these organizations are not necessarily reducing their current workforce, but they are also not generating new employment opportunities.
Junior Workers Squeezed
Reduced hiring often receives less public attention than outright layoffs, as companies rarely publicize such decisions. Research from Goldman Sachs indicates that over the past year, AI has contributed to a decrease in monthly payroll growth by approximately 16,000 jobs, leading to a 0.1 percentage point increase in the unemployment rate.
“AI appears to be finally impacting labor, but it’s not primarily through increased layoffs. The main mechanism seems to be reduced hiring, particularly of junior workers,” explained Daniel Keum, an associate professor of management at Columbia Business School, to CBS News.
Younger workers may encounter particular obstacles, as entry-level roles are generally more susceptible to automation compared to senior positions, according to experts.
“The most significant impact of AI will likely stem from reduced hiring of junior staff,” Keum commented, adding that “seniors are considerably more difficult to replace.”
AI may also lead to a transformation of job requirements, potentially creating new roles that do not align with the existing skill sets of workers displaced by automation.
“The individuals who are laid off are not necessarily the ones who secure the next set of jobs, because the roles themselves are different,” observed Ken Matos, an organizational psychologist and director of insights at the hiring platform HiBob.
Despite these challenges, Matos anticipates that hiring will rebound once companies complete their substantial AI investments.
“Currently, companies are redirecting labor expenditures into technological investments,” Matos noted. “It is hoped that these funds will eventually return to labor costs once the technology is fully implemented.”
Positive Spin
Corporations are also contending with a range of other pressures, including geopolitical instability, fluctuating U.S. tariff policies, and other sources of economic uncertainty, all of which could be contributing to layoffs and hindering hiring.
However, framing workforce reductions as part of an AI strategy may convey a more favorable message to investors than citing decreased demand or escalating costs, according to Daco.
“When you announce layoffs in general, it’s not viewed positively by markets and investors,” Daco remarked. “But when you state that you are proceeding with layoffs due to AI, it is beneficial from a communications perspective.”
Attributing job cuts to AI can assist companies in “framing a complex situation into a simple message that is easily understood,” said Clarence Lee, a tech entrepreneur and professor at the Cornell SC Johnson College of Business.
Currently, only about 10% of firms are utilizing AI for the production of goods and services, and only a subset of these are replacing workers with the technology, according to Daco.
“There is some job displacement occurring, but we are not witnessing massive job dislocation as a direct consequence of AI at this juncture,” he stated.
Dan Freedman, a Google software engineer and member of the Alphabet Workers Union, perceives a correlation between the recent surge in layoffs and the drive to adopt AI. He also clarified that he does not believe the technology is replacing workers on a one-to-one basis.
“AI is simply the latest concern about our jobs that we must navigate,” he told CBS News.
What Should Workers Do?
Experts advise that workers who combine AI proficiency with adaptability are likely to be best positioned as the labor market continues to evolve.
“AI is a dynamic entity, so we are now seeking individuals who can accept risk, are motivated by continuous learning, and are engaged by transformation,” Matos said. “This is as much a personality trait as it is a skill set.”
Lee recommends that workers focus on understanding AI’s capabilities while identifying skills that remain uniquely human.
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“That is where the true potential is unlocked,” he concluded.
