US Layoffs Hit a 2-Year Low, But AI Is Still Companies' Top Excuse
Total job cuts fell sharply in July, yet employers cited AI more than any other reason for the layoffs that did happen — for the fifth month running.
What happened: US employers announced 33,429 job cuts in July, the lowest monthly total in two years and 46% below last year, according to outplacement firm Challenger, Gray & Christmas. Jobless claims are also at their lowest since 2022, and hiring plans jumped 47% from June. Yet AI was named as the single biggest reason for layoffs for a fifth straight month, blamed for a third of July's cuts. Year to date, AI has been cited in about 112,713 job cuts, roughly a quarter of all reductions in 2026, almost entirely concentrated in the technology sector.
Why it matters: The overall picture is more stable than the AI headlines suggest: layoffs are down, hiring is up 25% for the year, and the labor market looks balanced. But the pain isn't evenly spread. Tech job cuts are up 67% from last year, and Handshake data shows entry-level corporate job postings down 15% while applications per opening are up 30% — even as the wider job market cools less dramatically. That squeeze on new graduates and career-changers is where AI's disruption is most concretely showing up right now.
How it works, plainly: Not every "AI layoff" is clear-cut. Challenger tracks cuts as AI-related only when a company explicitly says so, and this month it flagged a case where a hospital cut nursing jobs after adopting AI-linked software — but leaders disputed that AI was the cause, so it landed in a fuzzier "possibly AI" category. Meanwhile Etsy cut 12% of its staff this week but its CEO explicitly said AI and cost-cutting were not the drivers, insisting the changes were about restructuring teams, not replacing people with software.
The rollout: Challenger's own analysts warn that as AI regulation develops, companies may get more careful — not less — about naming AI in layoff notices, since the label can spook workers even as it reassures investors. That makes it likely the real scope of AI's effect on jobs will get harder to measure, not easier, even as hiring in physical, non-desk industries like aerospace and manufacturing is picking up faster than office and tech roles.