AI Overtakes All Other Reasons For US Job Cuts As Layoffs Surge In 2026

Artificial intelligence has become the leading reason cited by employers for job cuts in the United States, with AI-related layoffs in the first five months of 2026 already surpassing the combined total recorded in 2024 and 2025, according to data from Challenger, Gray & Christmas.

The outplacement firm's latest report showed that US employers announced more than 97,000 job cuts in May, the highest total for the month since the Covid-19 pandemic in 2020. Layoffs have risen for three consecutive months, increasing from 48,307 in February to 60,620 in March, 83,387 in April and over 97,000 in May.

AI Becomes Top Layoff Driver

According to the report, artificial intelligence accounted for nearly 40% of all announced job cuts in May, up sharply from 7% in January.

The share of AI-related layoffs increased steadily through the year, reaching 10% in February, 25% in March and 26% in April before surging further in May.

In May alone, employers attributed 38,579 job cuts to automation, the highest monthly figure since Challenger began tracking AI-related layoffs in 2023.

The latest increase pushed total AI-linked job cuts in 2026 to 87,714. By comparison, companies cited AI as the reason for 54,836 layoffs during 2025 and 12,742 during 2024 combined.

"AI is now the leading reason companies give for cutting jobs," Andy Challenger, Chief Revenue Officer at Challenger, Gray & Christmas, said in the report.

Technology Sector Hit Hardest

The technology sector accounted for the largest share of workforce reductions.US technology companies announced 38,242 job cuts in May, the highest monthly total since August 2024.

On a year-to-date basis, technology sector layoffs have climbed 66% to 1.23 lakh, making it the hardest-hit industry.

According to Challenger, job cuts in technology are now running at nearly three times the level of the next most affected sector.

Despite the sharp rise in AI-related layoff announcements, several economists and labour market researchers cautioned against attributing all job losses directly to automation.

Daniel Keum, Associate Professor of Management at Columbia Business School, noted that the broader US labour market remains relatively resilient.

US payrolls increased by 172,000 in May, while employment data for March and April were revised upwards, according to figures from the Bureau of Labor Statistics.

Keum argued that AI's impact remains concentrated in specific industries, particularly technology, rather than across the wider economy.

Daniel Zhao also questioned whether companies citing AI as a reason for layoffs are necessarily replacing workers with automation.

"A company can say [AI] is why we're doing layoffs, but that doesn't necessarily mean that's actually why those layoffs are happening," Zhao said.

Similarly, Fabian Stephany expressed scepticism about some AI-related claims.

"I'm really skeptical whether the layoffs that we see currently are really due to true efficiency gains. It's rather really a projection into AI in the sense of 'We can use AI to make good excuses'," he said.

Hiring Remains Weak

While employment growth remains positive overall, hiring activity continues to lag historical levels.

Challenger reported that employers announced 80,742 planned hires in May, which the firm described as weak compared with pre-pandemic norms.

Labour market experts say a growing mismatch between available jobs and displaced workers is contributing to uncertainty.

"The jobs that are open aren't replacing the jobs that are lost," said Thomas Thompson, Chief Economist at Havas Edge.

Zhao advised workers to broaden their job searches and apply existing skills across industries rather than focusing solely on previous roles or sectors.

"There is going to be more disruption in the future, whether that's coming from AI, whether it's coming from political uncertainty, whether it's coming from other parts of the economy," he said. "That is the world that we are in today."