No extra new hires if AI can do the job.
That’s what Shopify CEO Tobi Lütke instructed workers 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, typically 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 nicely 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 current knowledge has pointed to AI turning into one of many high 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 knowledge from outplacement agency Challenger, Grey & Christmas. The agency now ranks AI among the many high 5 causes of workforce reductions this yr.
Layoffs are on the rise
Layoffs are surging within the U.S., with firms saying greater than 806,000 job cuts to date in 2025, the very best determine for that interval since 2020, in line with 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 similar time, firms have gotten extra selective about who and the place they rent. Entry-level roles are feeling the worst of this impression 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.
“Loads of entry-level work whenever you’re contemporary out of faculty is knowledge-intensive jobs the place you’re accumulating knowledge, transcribing knowledge, 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 try this fairly nicely and I’ve heard many managers say issues like: ‘We are able to scale back our entry stage head depend.’ … The most important disruption is probably going amongst these low-level staff, significantly the place work is predictable, tech-savvy, or extra normal.”
Based on Handshake, a Gen Z-focused profession platform, entry-level job postings, significantly 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
Almost half of Gen Z job seekers within the U.S. say they imagine synthetic intelligence has made their levels much less worthwhile, in accordance to a current survey. Contemporary graduates additionally face a tightening job market; the unemployment fee for current 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 a few of the worst of the business’s slowdown. The unemployment fee for these aged 20 to 30 within the sector has jumped roughly 3% for the reason that begin of the yr, in line with Joseph Briggs, senior international economist at Goldman Sachs.
“This can be a a lot bigger improve than we’ve seen within the tech sector extra broadly, or amongst different younger staff,” Briggs mentioned on the financial institution’s Exchanges podcast this week.
Slicing on the entry-level might make sense for an organization’s backside line within the brief time period; nevertheless, organizations that squeeze hiring on the entry stage an excessive amount of may see this technique backfire in the long run.
“If a whole lot of corporations are slicing, slicing, slicing on the entry stage, there’s a concern that they could truly 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 so forth,” 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 current 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 beneath President Trump, which have made firms hesitant to take a position or rent.
In March, the unemployment fee for college-educated People aged 22 to 27 hit 5.8%, the very best stage in 4 years, in line with knowledge from the Federal Reserve Financial institution of New York. For some, the determine, which is nicely 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. financial system, making it tough to separate the results of AI from bigger market forces. For instance, Oxford Economics estimates that 85% of the current 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. financial system is affected by a generational squeeze as individuals simply coming into the workforce are dealing with greater obstacles and fewer alternatives.
