Job cuts plunge to a 2-year low despite AI fears, economic shocks

Layoffs across the United States fell to their lowest level in two years during July, signaling a resilient labor market that is weathering economic shocks and concerns about artificial intelligence. Employers announced a total of 33,429 job cuts last month, marking a significant 46% decrease compared to the same period last year. This figure represents the lowest monthly total since July 2024.

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The pace of layoffs fell dramatically this summer.

The decline in announced job cuts is further supported by a decrease in weekly unemployment benefit claims. The four-week average for initial jobless claims has now fallen below 200,000 for the first time since October 2022, according to PNC Economics Research. Andy Challenger, a workplace expert at Challenger, Gray & Christmas, noted that "the pace of layoffs fell dramatically this summer."

Artificial intelligence continues to be a significant factor reshaping organizations, particularly within the technology sector, and is identified as the leading cause of layoffs for five consecutive months, accounting for 33% of job cuts in July. However, economists observe that AI-related job losses remain concentrated in the tech industry. Carl Weinberg, chief economist at High Frequency Economics, stated that "recently laid-off workers are finding jobs as fast as the economy is creating new ones," indicating a balanced labor market.

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Layoff plans continue to be announced primarily in tech, and artificial intelligence is still the story, as investments in the technology reshape organizations.

Despite employers' reluctance to engage in widespread firings, hiring remains modest, with job openings steady but below pre-pandemic levels. The Labor Department's upcoming July hiring data is anticipated to show a payroll gain of 97,500, following a weaker-than-expected 57,000 jobs added in June. While the national unemployment rate stands at a low 4.2%, some groups, particularly recent college graduates, face challenges. Job listings for entry-level corporate roles have decreased by 15%, while applications per job have surged by 30%, according to career platform Handshake.

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Recently laid-off workers are finding jobs as fast as the economy is creating new ones. That suggests the labor market is still balanced.