The Layoff Wave Is Here — But Is AI Really to Blame?
January 2025 saw the biggest wave of job cuts at the start of a year since the Great Recession. February's employment report surprised economists with a loss of 92,000 jobs instead of the 55,000 gain they'd predicted. And everywhere business leaders look, they're seeing question marks — about tariffs, the economy, global conflict, and the accelerating pace of AI.
It's a lot. And when uncertainty piles up, CEOs reach for a familiar lever.
Cash Is King When the Fog Rolls In
In uncertain times, holding onto cash starts to look like the smart play. And for most companies, the fastest way to protect cash is the same as it's always been: cut payroll.
"Payroll often represents the biggest line item on a company's balance sheet," said Sunil Setlur, founder of leadership advisory firm Cognisen.co. When markets reward companies that announce layoffs — as Wall Street has done repeatedly, from Meta to Spotify — and executive compensation is tied to stock performance, those decisions become easier to make than they might otherwise be.
Add a softer job market that gives employers more leverage, and the result is a tightening of performance standards, a thinning of middle management, and headline-grabbing cuts like Amazon's pledge to eliminate 16,000 corporate roles in the name of becoming the "world's largest startup."
AI Is Getting the Blame. But Does It Deserve It?
The narrative forming around these layoffs is hard to miss: AI is coming for white-collar work, and this is just the beginning.
Block made the case explicitly in February, cutting more than 40% of its workforce and citing AI-driven efficiencies that let smaller teams accomplish more. CEO Jack Dorsey predicted many companies would eventually follow suit. A Morgan Stanley survey of 900+ executives found that at companies in industries facing significant near-term AI disruption, employment had already dropped 4% on average while productivity rose — leading the firm to conclude that AI's impact is "measurable and accelerating faster than expected."
That's not nothing. But experts caution against letting AI absorb all the blame.
"AI is just a convenient scapegoat," said Alibek Dostiyarov, cofounder of Perceptis, an AI software firm for professional services. Many of the companies cutting headcount aggressively today are the same ones that over-hired during the pandemic boom and are now correcting course. The AI narrative provides a tidy, forward-looking story for what is often a more mundane financial decision.
Dostiyarov estimates AI could deliver genuine long-term efficiency gains of 20–30% — but predicts those gains will more likely eliminate specific tasks than entire jobs on a one-for-one basis.
Tim Walsh, CEO of KPMG US, goes further. He doesn't see AI as a meaningful driver of current layoffs at all. Rather, companies are taking a broader look at their workforce and asking where people are actually needed — and KPMG, he notes, expects to hire more people as it builds out its AI capabilities.
The Shoe Hasn't Fully Dropped — Yet
Here's the uncomfortable truth: AI anxiety is widespread, but the technology's full workforce impact is still unfolding. Adoption takes time. Integration takes longer. The ripple effects of today's AI investments may not show up in employment data for months or years.
"A lot of people have been just waiting for the AI shoe to drop," said Jeff Fettes, CEO of Laivly, which deploys AI agents for Fortune 500 customer service operations.
For now, the honest picture is messier than either the optimists or the doomsayers want to admit. Some of these layoffs are about AI. Many are about economics, overcorrection, and investor optics. And separating the two — figuring out which jobs are gone because of a market cycle and which are gone for good — is one of the harder questions facing business leaders, workers, and policymakers alike.
The fog, for the moment, isn't lifting.