No extra new hires if AI can do the job.
That’s what Shopify CEO Tobi Lütke advised employees in a memo earlier this 12 months. And he’s not alone.
Over at consulting large McKinsey, 1000’s of AI brokers have been deployed all through the corporate, typically choosing up duties beforehand dealt with by junior employees. 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, corporations 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 changing 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 instantly 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 12 months.
Layoffs are on the rise
Layoffs are surging within the U.S., with corporations saying greater than 806,000 job cuts to date in 2025, the very best determine for that interval since 2020, in accordance with Challenger, Grey, & Christmas. The tech sector has been hit the toughest, with over 89,000 layoffs within the trade alone. The agency discovered that greater than 27,000 tech jobs since 2023 have been instantly attributed to AI-driven redundancy, as corporations streamline operations and restructure departments.
On the similar time, corporations have gotten extra selective about who and the place they rent. Entry-level roles are feeling the worst of this influence because the expertise is more and more good at automating junior-level work. Many companies are seeing simple cost-cutting alternatives on the entry degree.
“Lots of entry-level work whenever you’re contemporary out of school is knowledge-intensive jobs the place you’re accumulating 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 College of Administration, advised Fortune. “AI can try this fairly effectively and I’ve heard many managers say issues like: ‘We will cut back our entry degree head rely.’ … The most important disruption is probably going amongst these low-level staff, notably the place work is predictable, tech-savvy, or extra common.”
In line with Handshake, a Gen Z-focused profession platform, entry-level job postings, notably in company roles, have dropped 15% year-over-year. On the similar 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 imagine synthetic intelligence has made their levels much less helpful, in accordance to a latest survey. Contemporary 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 employees within the tech sector are feeling a number of the worst of the trade’s slowdown. The unemployment charge for these aged 20 to 30 within the sector has jumped roughly 3% for the reason that begin of the 12 months, in accordance with 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 employees,” Briggs mentioned on the financial institution’s Exchanges podcast this week.
Slicing on the entry-level could make sense for an organization’s backside line within the brief time period; nonetheless, organizations that squeeze hiring on the entry degree an excessive amount of might see this technique backfire in the long run.
“If a variety of companies are slicing, slicing, slicing on the entry degree, there’s a concern that they may really miss out on the expertise that’s going to create their pipeline going ahead that’s going to grow to be the managers, executives, and many others,” Botelho mentioned.
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 severe 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 corporations 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 degree in 4 years, in accordance with 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.
Nevertheless, the decline in entry-level job postings is going on alongside a slowing U.S. economic system, making it troublesome 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 seek 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 individuals simply coming into the workforce are dealing with greater limitations and fewer alternatives.
