No extra new hires if AI can do the job.
That’s what Shopify CEO Tobi Lütke instructed employees in a memo earlier this yr. And he’s not alone.
Over at consulting large McKinsey, hundreds of AI brokers have been deployed all through the corporate, usually choosing up duties beforehand dealt with by junior staff. At “AI-first” Duolingo, CEO Luis von Ahn is utilizing “AI fluency” to find out who’s employed and promoted on the firm.
Throughout the remainder of the Fortune 500, firms are effectively and actually leaning into their AI effectivity period, and, for a lot of, which means extra cuts and fewer hiring.
It’s maybe no shock that some latest information has pointed to AI turning into one of many prime drivers of workforce reductions.
Within the U.S., within the first seven months of 2025 alone, generative AI adoption was immediately linked to over 10,000 job cuts, in accordance to new information from outplacement agency Challenger, Grey & Christmas. The agency now ranks AI among the many prime 5 causes of workforce reductions this yr.
Layoffs are on the rise
Layoffs are surging within the U.S., with firms asserting greater than 806,000 job cuts thus far in 2025, the very best determine for that interval since 2020, in response to Challenger, Grey, & Christmas. The tech sector has been hit the toughest, with over 89,000 layoffs within the business alone. The agency discovered that greater than 27,000 tech jobs since 2023 have been immediately attributed to AI-driven redundancy, as firms streamline operations and restructure departments.
On the identical time, firms have gotten extra selective about who and the place they rent. Entry-level roles are feeling the worst of this affect because the know-how is more and more good at automating junior-level work. Many corporations are seeing straightforward cost-cutting alternatives on the entry stage.
“Lots of entry-level work while you’re contemporary out of school is knowledge-intensive jobs the place you’re gathering information, transcribing information, and placing collectively primary visualizations, and studying the group from the bottom up,” Tristan L. Botelho, affiliate professor of organizational conduct at Yale Faculty of Administration, instructed Fortune. “AI can do this fairly effectively and I’ve heard many managers say issues like: ‘We are able to scale back our entry stage head depend.’ … The largest disruption is probably going amongst these low-level workers, significantly the place work is predictable, tech-savvy, or extra basic.”
In line with Handshake, a Gen Z-focused profession platform, entry-level job postings, significantly in company roles, have dropped 15% year-over-year. On the identical time, the variety of employers referencing “AI” in job descriptions has surged by 400% over the previous two years.
Gen Z graduates really feel the squeeze
Practically half of Gen Z job seekers within the U.S. say they consider synthetic intelligence has made their levels much less useful, in accordance to a latest survey. Recent graduates additionally face a tightening job market; the unemployment charge for latest faculty grads has climbed to an estimated 6% within the 12 months main as much as Might, considerably greater than the nationwide common of round 4%.
Younger staff within the tech sector are feeling among the worst of the business’s slowdown. The unemployment charge for these aged 20 to 30 within the sector has jumped roughly 3% because the begin of the yr, in response to Joseph Briggs, senior world economist at Goldman Sachs.
“It is a a lot bigger enhance than we’ve seen within the tech sector extra broadly, or amongst different younger staff,” Briggs stated on the financial institution’s Exchanges podcast this week.
Slicing on the entry-level could make sense for a corporation’s backside line within the quick time period; nonetheless, organizations that squeeze hiring on the entry stage an excessive amount of may see this technique backfire in the long run.
“If numerous corporations are slicing, slicing, slicing on the entry stage, there’s a worry that they may really miss out on the expertise that’s going to create their pipeline going ahead that’s going to change into the managers, executives, and many others,” Botelho stated.
The job market is hitting a wall
The long-standing fears round AI consuming away at graduate jobs haven’t been helped by latest labor statistics.
The U.S. labor market confirmed indicators of a critical slowdown in July, with weaker-than-expected job progress and downward revisions for earlier months. Economists attributed the stall largely to enterprise uncertainty pushed by ongoing tariff modifications underneath President Trump, which have made firms hesitant to take a position or rent.
In March, the unemployment charge for college-educated Individuals aged 22 to 27 hit 5.8%, the very best stage in 4 years, in response to information from the Federal Reserve Financial institution of New York. For some, the determine, which is effectively above the nationwide common, served as a affirmation that the AI jobs apocalypse was already upon us.
Nonetheless, the decline in entry-level job postings is going on alongside a slowing U.S. economic system, making it tough to separate the results of AI from bigger market forces. For instance, Oxford Economics estimates that 85% of the latest rise in unemployment is because of new labor market entrants struggling to search out jobs, not essentially job eliminations throughout the board.
AI-driven or not, the U.S. economic system is affected by a generational squeeze as folks simply coming into the workforce are going through greater limitations and fewer alternatives.
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