AI-washing and the huge layoffs hitting the economic system

Company America is getting rocked by historic rounds of white-collar layoffs, main some to surprise: Has AI lastly come for his or her jobs?

Whereas the proliferation of generative and agentic synthetic intelligence is taking part in a task, latest job lower bulletins from firms like Amazon, UPS and Goal are about much more than simply the advance of latest know-how. 

The corporations, which every introduced layoffs in latest weeks totaling greater than 60,000 roles eradicated this yr, mentioned they’re making an attempt to chop company bloat, streamline operations and modify to new enterprise fashions.

However within the absence of the Bureau of Labor Statistics’ month-to-month jobs report, which has gone darkish amid the federal government shutdown, the layoff bulletins have raised questions concerning the power of the labor market and if it is the beginning of an AI-driven, white-collar recession. 

Some firms have outright mentioned they’re changing employees with AI. Klarna CEO Sebastian Siemiatkowski mentioned in Could the corporate was in a position to shrink its head depend by about 40%, partly due to AI. Duolingo mentioned in April it’s going to cease utilizing contractors for work that AI can deal with. Salesforce laid off 4,000 buyer assist roles in September, saying that AI can do 50% of the work on the firm.

However specialists interviewed by CNBC mentioned some firms might be “AI-washing” their job cuts, blaming layoffs on the brand new know-how to cowl up enterprise fumbles and old school value slicing.

“We spend numerous time trying fastidiously at firms which are really making an attempt to implement AI, and there is little or no proof that it cuts jobs wherever close to like the extent that we’re speaking about. Most often, it would not lower head depend in any respect,” mentioned Peter Cappelli, a professor of administration on the Wharton College and director of its Heart for Human Assets. “Utilizing AI and introducing it to save lots of jobs seems to be an enormously difficult and time-consuming train. … There’s nonetheless a notion that it is easy and straightforward and low-cost to do, and it is actually not.” 

Nonetheless, the cuts, which come after a string of layoffs throughout the tech business, have solid a darkish cloud on a teetering economic system that is been wracked by persistent inflation, rising delinquencies, falling client sentiment and a mean efficient tariff charge that is at its highest degree in practically a century, in accordance with estimates from The Finances Lab at Yale College.

The rising pile of dangerous information has executed little to shock the inventory market, which is at near-record highs, however that is largely as a result of it has been buoyed partly by AI megacaps.

Cappelli attributed the latest surge in layoff bulletins to issues concerning the state of the economic system. He additionally famous a probable “bandwagon” impact by which firms see their rivals slicing so that they too begin making cuts. 

“If it appears like all people is slicing, you then say, ‘They have to know one thing we do not know,'” mentioned Cappelli. He added buyers usually reward slicing: “They need to hear that you just’re slicing as a result of it appears such as you’re doing one thing good. It appears like changing into extra environment friendly.”

To make sure, AI and automation are probably enabling a few of the cuts, and the rising know-how is poised to assist all firms scale back prices and increase effectivity within the coming years. However the causes behind every layoff and the position AI is taking part in are nuanced, and fluctuate firm by firm.

Starbucks’ determination to lower round 2,000 company jobs in two rounds this yr is expounded to slowing gross sales on the firm and a bigger turnaround effort led by its new CEO, Brian Niccol. Layoffs at Meta’s AI unit, which impacted round 600 jobs, got here as the corporate mentioned it desires to function extra nimbly and scale back layers. Intel’s determination to put off about 15% of its workforce got here after it overinvested in chip manufacturing with out satisfactory demand. 

Collectively, they characterize what John Challenger, CEO of job placement agency Challenger, Grey & Christmas, described as a turning level within the economic system and job market.

“We had been on this no-hire, no-fire, kind of zone. Economic system was transferring forward. The labor markets had been feeling stress, however definitely, unemployment had stayed comparatively robust,” he mentioned. “These job cuts do recommend that the dam could also be breaking because the economic system slows.”

The earliest alerts, he mentioned, might be coming from retail, transport and distribution.

Throughout the Covid-19 pandemic, Amazon went on a hiring spree partly to satisfy a surge in demand for e-commerce and cloud computing providers, main its company and front-line workforces to greater than double to 1.3 million workers between 2019 and 2020. 

By 2021, the corporate had swelled to 1.6 million workers globally, the identical yr Andy Jassy succeeded Jeff Bezos as CEO. 

Since taking on, Jassy has been making an attempt to undo a few of that work.

Final week’s layoff announcement, impacting 14,000 company jobs, is anticipated to be the most important within the firm’s historical past and to have an effect on practically each unit within the firm. It marks Amazon’s second spherical of layoffs in three years and quantities to greater than 41,000 company job cuts since 2022, with extra probably on the way in which come 2026.

Although AI is a part of the image, there’s extra at work behind the reductions.

Jassy mentioned within the days following the announcement that the adjustments had been neither AI nor financially pushed, however had been as an alternative to chop company fats so the corporate can function because the world’s largest startup.

Amazon mentioned it is not changing employees with AI, a minimum of not but, however it does want to chop workers so it may spend money on the know-how. As these prices come down, Amazon has earmarked hefty investments in cloud infrastructure to assist AI workloads whereas concurrently pushing out a flurry of AI providers and instruments throughout the corporate. 

It is contributed to an increase in capital expenditures, which are actually anticipated to succeed in $125 billion this yr, up from a previous forecast of $118 billion.

Jassy mentioned beforehand that the corporate’s workforce would shrink sooner or later on account of its embrace of generative AI however it nonetheless plans to maintain hiring in “key strategic areas.” Over time, the corporate will want “fewer folks doing a few of the jobs which are being executed at present” however “extra folks doing different kinds of jobs,” Jassy mentioned in June. 

The cuts are additionally half of a bigger objective of Jassy’s to make the corporate extra nimble, scale back paperwork and take away layers so it may function quicker and smarter. 

“It is tradition,” Jassy mentioned throughout Amazon’s quarterly earnings name Thursday. “If you happen to develop as quick as we did for a number of years, you already know, the dimensions of the companies, the variety of folks, the variety of places, the kinds of companies you are in, you find yourself with much more folks than what you had earlier than, and you find yourself with much more layers.”

In January, UPS introduced a main change in its technique.

The logistics agency mentioned it was going to pare down its relationship with its largest buyer, Amazon, in favor of higher-margin companies that require fewer folks to function. 

In fiscal 2024, Amazon shipments represented practically 12% of income for UPS. The logistics big mentioned it was planning to scale back that quantity by greater than half by June due to the comparatively low margins.

“This was not their ask. This was us. This was UPS taking management of our future,” CEO Carol Tomé instructed analysts in January. 

In flip, UPS mentioned it was pivoting to extra worthwhile companies, like well being care, returns and business-to-business providers and in consequence, would require fewer assets. 

“As we carry quantity down, we won’t solely scale back the hours of miles related to this quantity, we can take out mounted prices to match our capability to our new anticipated quantity ranges,” finance chief Brian Dykes mentioned in January. “We anticipate to shut as much as 10% of our constructing, in the reduction of our car and plane fleets and scale back labor.” 

Final week the corporate mentioned it had deepened beforehand deliberate job cuts for a complete of 48,000 roles eradicated to this point this yr throughout operational workers and workplace employees.

Within the first half of 2025, parcel volumes had been down 5.4% at UPS in comparison with the year-ago interval, in accordance with knowledge from ShipMatrix, and the corporate has been altering its company construction to regulate to decrease quantity.

The majority of its layoffs this yr, representing 34,000 operational jobs, had been associated to its determination to shut 93 buildings – not exchange folks with robotics, the corporate mentioned. 

The 14,000 further company roles it lower had been partially associated to AI, however the know-how was not the first driver, a spokesperson mentioned. 

The place AI and automation are anticipated to hit UPS most is in its future hiring plans.

As the corporate plans to carry automation to extra of its services, it will not want to rent as many individuals. Final week, UPS mentioned 66% of its quantity throughout the fourth quarter would come by way of automated services, up from 63% a yr prior. That quantity is anticipated to maneuver greater within the years forward. 

Nonetheless, that does not essentially imply these jobs are disappearing – some might be migrating from UPS to different firms, mentioned Jason Miller, a professor of provide chain administration at Michigan State College’s enterprise faculty.

Miller mentioned there is a “reallocation” impact occurring the place one agency is shedding enterprise and shedding payroll — whereas one other is gaining. The variety of jobs could be the similar, however the location, qualities and duties can differ, he mentioned. 

BLS knowledge on the variety of folks employed in “courier” positions, which covers roles at locations like UPS and Amazon, displays that pattern. As of August, courier positions had been solely down about 2% from their all-time excessive, and so they’ve been on the rise over the past three years, the information present. 

Goal’s announcement final month that it will be slicing 1,800 jobs, representing about 8% of its company workforce, is a window into each client spending and the retailer’s personal particular challenges. 

It is Goal’s first main spherical of layoffs in a decade and comes after 4 years of roughly stagnant income. The retailer’s incoming CEO, Michael Fiddelke, mentioned the cuts are about lowering complexity at an organization that is seen its workforce develop quicker than gross sales. 

Not like a few of its rivals, the majority of Goal’s income comes from the sorts of merchandise which are good to have, however not vital, akin to vacation mugs, fashionable sweaters and residential decor. 

Which means when client spending begins to decelerate, Goal feels it extra acutely than its rival Walmart, which earns nearly all of its income from groceries. 

Slower client spending has been partially accountable for a decline in Goal’s efficiency lately, however the introduction of tariffs, that are pushing costs greater, might make that impression even worse. 

“Consumers’ willingness to pay is staying flat, inflation is excessive, revenue is not going very up so corporations’ capability to form of enhance worth to take care of their margin is being squeezed,” mentioned Daniel Keum, an affiliate professor of administration at Columbia Enterprise College, who research labor market dynamics. “If you cannot enhance worth, you need to scale back value.

“How operationally do I handle value?” Keum added. “I imply No. 1, like, let’s lay off white-collar folks.” 

Exterior of macroeconomic circumstances, Goal’s enterprise has additionally suffered from quite a few self-inflicted challenges. The high quality of its merchandise has taken a dive, fewer workers and frequent out-of-stocks have made its shops much less satisfying to buy in, clients and insiders instructed CNBC earlier this yr. The retailer has additionally struggled to handle its stock, which has impacted its profitability. 

All of those points mixed have left Goal with a workforce that has grown quicker than gross sales and a posh company construction that has hampered decision-making and created pointless crimson tape. 

Between fiscal 2023 and monetary 2024, Goal’s international workforce grew 6% from 415,000 workers to 440,000, however in the identical time interval, gross sales declined 0.8%, in accordance with firm filings. 

“The reality is, the complexity we have created over time has been holding us again,” Fiddelke instructed Goal workers in a memo when saying the job cuts. “Too many layers and overlapping work have slowed selections, making it tougher to carry concepts to life.”

He did not cite AI in his memo however did say the cuts will assist the corporate execute quicker so it may higher “speed up know-how.” 

— CNBC’s Melissa Repko and Steve Liesman contributed to this report.