Why AI Is Being Blamed for Layoffs
| Many headlines say AI is causing layoffs, but is that really the full story? You’ve probably heard two different stories lately: 1. “Unemployment is low. The economy is fine.” 2. “Tech companies are laying off thousands. AI is replacing workers.” So, what’s actually happening? Is AI causing layoffs?: The job market isn’t booming, but it’s not collapsing either. 2025 Was Weaker Than Most People Realized After revisions, job growth last year was much softer than originally reported. Hiring slowed significantly compared to the post-pandemic surge. US only added about 181,000 jobs in 2025. We’re now in what economists call a “low-hire, low-fire” market:Companies aren’t hiring aggressively.But layoffs aren’t exploding across the economy either. It’s more of a pause than a panic. |
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| Why companies blame AI for layoffs: Companies like Block recently cut large portions of their workforce, citing AI and efficiency. But here’s the bigger picture: During 2020–2022:Tech companies over-hired.Growth surged.Interest rates were near zero.Expansion was easy. Now:Growth has normalized.Rates are higher.Margins matter again. So yes…AI is increasing productivity. But many layoffs are also a correction from over-expansion. It’s not just “AI replacing workers.” It’s companies becoming leaner after growing too fast. Why This Matters When hiring slows: Wage growth cools. Consumers get cautious. Spending slows. Businesses pull back. That doesn’t automatically mean recession. But it does mean the economy is in a more cautious phase. And that affects housing, lending, and overall confidence. 2026 Jobs market is OFF to a stronger start than 2026. US added 130,000 Jobs in 2026 so far, those numbers could get revised down but that is a better start and sign than 2025. Focusing more on where the jobs are added will be a key factor. The other issue is that JOB opening came in lighter so there are less jobs for Americans to choose from. The truth about AI layoffs The job market isn’t collapsing. But it’s clearly cooling. Companies did over hire from 21,22,23 and now they are starting to shed some of those jobs. They can blame AI for this because it sounds nicer and that seems to be the trend but unfortunately, they just have to many employees and they need to cut. Lots of the cuts are from the executive level and higher paying jobs. They held on as long as they can but the economy is changing, consumer is pulling back and companies need to cut cost to save money. Companies are optimizing. Hiring is selective. AI is accelerating productivity. Growth is more concentrated. We’re not in chaos. We’re in recalibration. What does this mean for RATES The Feds have 2 rate cuts on the table for 2026, interest rates are falling and lower than 2025 already. Jobs are at the TOP of the list for lower rates, if the job market starts to get worse, rates will fall further and further. We have a new FED chairman starting in a few months and we will wait to see what that forward guidance will be. Labor, consumer spending, inflation are the TOP 3 sectors that will move rates always. Pandemics, wars or something else that could be unforeseen could over power those 3 in the short run and cause more rate cuts, lower rates and move the trends faster in one direction or the other. Data is what rates truly pay attention to at the end of the day and events can definitely change data or the direction that data might go. Learn more about our mortgage insights here. -Kenny Simpson |
