The U.S. job market, already showing the strain from global trade tensions, is showing early signs of another critical issue facing workers today: artificial intelligence.
In July alone, rising adoption of generative AI technology by private employers accounted for more than 10,000 job cuts, according to a report released this week by Challenger, Gray & Christmas. The outplacement firm lists AI as one of the top five factors contributing to job losses in 2025.
Layoffs have jumped this year, adding to fresh concerns about a pullback in hiring after new llabor data on Friday showed that employers added only 73,000 jobs in July — well short of analyst forecasts. Through July, companies have announced more than 806,000 private-sector job cuts, the highest number for that period since 2020, Challenger, Gray & Christmas said.
Of those layoffs, the technology industry wielded the sharpest axe — private companies in the sector have announced more than 89,000 job cut, up 36% from a year ago. Since 2023, more than 27,000 job cuts have been directly tied to the advent of AI, according to the firm.
“The industry is being reshaped by the advancement of artificial intelligence and ongoing uncertainty surrounding work visas, which have contributed to workforce reductions,” Challenger, Gray & Christmas said.
The impact of AI on hiring is perhaps most visible among younger workers. Job listings for the kind of entry-level corporate roles traditionally available to recent college graduates have declined 15% over the past year, according to Handshake, a career platform geared toward Gen Z employees. Over the past two years, there has been a 400% increase in employers using “AI” in job descriptions, the firm found.
While AI is already starting to reshape how Americans work, for now other factors are having a more immediate impact on the labor market. More than 292,000 positions have been eliminated this year because of cuts linked with the Department of Government Efficiency (DOGE), an initiative to reduce federal spending spearheaded by billionaire Elon Musk, Challenger, Gray & Christmas found.
“We are seeing the federal budget cuts implemented by DOGE impact non-profits and health care in addition to the government,” Andrew Challenger, senior vice president Challenger, Gray & Christmas, said in a statement.
Layoffs are also accelerating in the vast retail sector as tariffs raise the cost of doing business, according to Challenger, Gray & Christmas. Retailers have announced more than 80,00- cuts through July, up nearly 250% compared to the same period last year, the firm found.
“Retailers are being impacted by tariffs, inflation and ongoing economic uncertainty causing layoffs and store closures. Further declines in consumer spending could trigger additional losses,” the group said.
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