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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
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Lay-offs and AI
Well, this doesn’t sound very good. From my colleagues at the FT:
Corporate workers are fighting for a shrinking pool of jobs as mass lay-offs and a hiring slowdown stoke fears of a “white-collar recession”, amid mounting pressure from tariffs, slowing economic growth and artificial intelligence.
In the past week, companies including Amazon, Paramount, United Parcel Service and Target have all announced they will slash a combined 31,800 office-based roles, with some directly citing plans to use AI to reduce their labour force. Others cited rising costs from President Donald Trump’s tariffs regime and falling sales as consumers curtail their spending.
There has been a conspicuous number of high profile lay-off announcements lately, and journalists have been busy looking at them from one angle or the other. Two related points dominate the coverage: AI and the young. The fact that big tech companies (namely Amazon and Meta) are among the companies announcing lay-offs, it is argued, makes the job losses more ominous — a glimpse of the econo-technological future. “Those big technology companies are earlier adopters [of AI] so we are likely to see the impact there first,” said one source in the FT story. Second, young people are said to be getting the worst of it, possibly because entry-level jobs are the easiest for AI to replace (a very good story in the Wall Street Journal went into this aspect in detail).
Sometimes a purported economic “trend” turns out to be simply made up: an issue becomes so socially or culturally salient that observers see only what they have been primed to see. This does not seem to be the case here: there does at the very least seem to be an unusually high number of lay-off announcements, according to the standard source on this topic, the monthly report from “executive outplacement” firm Challenger, Gray and Christmas. From the latest edition:
So far this year, companies have announced 946,426 job cuts, the highest YTD since 2020 when 2,082,262 were announced. It is up 55 per cent from the 609,242 job cuts announced through the first three quarters of last year and is up 24 per cent from the 2024 full year total of 761,358. The 2025 year-to-date total is the fifth highest in the 36 years Challenger has reported.
But more lay-off announcements does not mean more lay-offs. And there is very good data to suggest that the number of people losing their jobs is not rising significantly: new unemployment claims, which are collected at the state level and therefore (mostly) unaffected by the shutdown. Below is the trend for those. The compilation and extrapolation from the available state numbers since September comes from JPMorgan:
Weekly new claims have been quite stable for three years, mostly fluctuating in a band between 200,000 and 260,000. And the picture may be improving: Skanda Amarnath of Employ America points out that more states are reporting falling levels of claims than rising claims versus a year ago, and this ratio is on an improving trend.
This picture is more or less reinforced by the lay-offs portion of the Job Openings and Labour Turnover Survey, which we have through August. As many people have pointed out recently, the larger problem appears not more firing, but less hiring:
All that said, it is clear that weakening demand for labour is manifesting itself in a very soft job market for young people. A long-term chart of unemployment among 20-24 year olds shows that joblessness in this group is at levels previously seen at the onset of recessions:
This leads us to the murkier questions about whether AI is having a labour market impact, in particular at the entry level. I’m not sure if this question is possible to answer at this point, and am sceptical of the corporate announcements that cite AI as a reason for cutting jobs. At this early date, how would companies know, outside of very specific tasks, how much sustained productivity improvement to expect from AI? Michael Santoli of CNBC commented on Bluesky that
We’re just in a mode where corporate managers are going after past over-hiring, padding margins, navigating big tech-spending commitments and conveying to investors they are forward-thinking and efficiency-minded.
This makes sense to me. In the case of big tech, those companies have been in on-and off job cutting mode since the post-pandemic hiring frenzy. And markets, as we recently argued, have been quite demanding about profits and cash flow at large companies; corporate leadership will be aware of this. Putting lay-offs down to AI sounds better than saying “we need to keep margins high so we’re sacking some low performers” and politically safer than saying “unpredictable Trump tariff policy means we are hiring less young people.”
One good read
Trump’s positive impact.
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