AI-related layoffs often hit entry-level roles, young workers

Mass layoffs at top tech firms and grim jobs reports in October appear to confirm that AI is taking away jobs — a trend likely to continue, experts said. At the same time, AI-assisted human roles will grow, perhaps partially offsetting workforce cuts.

For now, AI is apparently being used to reduce corporate bloat, replace entry-level jobs and slow the hiring of young workers across sectors where AI agents can be deployed.

In a survey released last week, McKinsey said more organizations will use AI tools to reduce headcounts than grow it. A third of respondents said their organization’s workforce will decline as a result of AI; only “a small percentage of respondents say they expect their organization’s head count to increase,” McKinsey said in its State of AI in 2025 report.

Despite cuts in some sectors, there is growing demand for AI skills in fields such as claims adjusters, digital marketers, and wealth managers, where the technology fits more neatly into corporate workflows.

“It is not yet clear what impact AI will have on the number of jobs and nature of work,” Lareina Yee, senior partner and McKinsey Global Institute director, said in the study.

But the short-term impact of AI is being felt now. Job cuts in October totaled 153,074, according to a report released last week by job placement firm Challenger, Gray & Christmas. That’s up 175% compared to the same month in 2024.

(The US Bureau of Labor Statistics did not report job numbers for October because of the US government shutdown.)

The higher pace of cuts is due to several reasons, including ongoing AI adoption, rising costs, lower corporate spending, and hiring freezes, said Andy Challenger, chief revenue officer for Challenger, Gray & Christmas. Of the overall job losses in October, 31,039 cuts were the result of automation and restructuring caused by AI — the second-most cited reason after cost-cutting, which was blamed for 50,437 cuts.

“AI has been cited for 48,414 job cuts this year,” Challenger, Gray & Christmas said in a statement. The firm does not specifically track the nature of jobs lost to AI in its surveys, a company spokeswoman said via email.

As the McKinsey data alluded, it is still early to determine AI’s long-term impact on the job market, though researchers are rushing to gather data.

ADP in its recent jobs report pegged the number of jobs added in October at 42,000, with employment up in construction, mining and trade and transportation. By contrast, the information sector — a heavy consumer of AI services — lost 17,000 jobs. 

AI “may have contributed a meaningfully significant amount to the overall slowdown in hiring for entry-level workers,” Bharat Chandar, a postdoctoral fellow at the Stanford Digital Economy Lab (SDEL), said in a blog post last month. SDEL works with ADP to publish employment data.

Chander said there still is no clear way to measure AI’s impact on the labor market. He is among several researchers who have signed a letter urging the US Department of Labor to start measuring the technology’s impact on job loss and creation.

Ger Doyle, regional president of North America at ManpowerGroup, agreed that AI has had some impact on lower-end, repetitive roles and in software development. “We haven’t yet seen widespread disruption, but that may come over the longer term. Many companies are using this moment to streamline their workforces, scale back the mass hiring that followed COVID, and focus on reducing costs.”

Companies are increasingly focused on leaner operations and profit optimization, “but AI investments continue to climb,” Doyle said. Meanwhile, mentions of AI skills in job postings have risen 16% in just three months, even as overall tech hiring fell 27% — the steepest decline in three years.

“AI skill mentions remain concentrated in fewer than 10 occupations, with software developers, data scientists, and database architects leading the way. These roles account for most AI-related hiring,” Doyle said.

McKinsey in its survey said that AI agents — which have been termed “digital labor” — haven’t entered the production stage yet, which makes it hard to determine their impact on human labor.

Many tech firms have announced cuts this year. Meta, for example, laid off 600 workers from its artificial intelligence unit in October, just months after publicly offering millions of dollars in salaries to recruit top AI executives for its “superintelligence labs.” The layoffs were to reduce bloat in its AI operations.

That same month, Amazon said it would cut 14,000 jobs by “further reducing bureaucracy, removing layers, and shifting resources.”

“This generation of AI is the most transformative technology we’ve seen since the Internet, and it’s enabling companies to innovate much faster than ever before,” Beth Galetti, senior vice president of people experience and technology at Amazon, wrote in a blog post.

In September, Salesforce announced it would lay off 4,000 employees, which CEO Marc Benioff attributed to AI automating many roles, according to CNBC. 

Earlier this year, Benioff talked about AI agents augmenting and improving the efficiency of human labor across vertical sectors during an episode of Foundry’s Tech Talk with Keith Shaw. During the show, Benioff said companies need to wake up to the fact that AI will replace human roles, reduce headcounts, and generate cost savings. 

“We have to deal with reality here,” he said, adding, “we need to start adjusting and looking at what is really going on.”