Job cuts plunge to a 2-year low despite AI fears, economic shocks

In July, U.S. layoffs reached their lowest level in two years, despite concerns surrounding artificial intelligence and economic turbulence, according to recent data. Employers announced 33,429 job cuts, a 46% decline from the previous year, reported outplacement firm Challenger, Gray & Christmas. The lowest number of layoffs since July 2024 were recorded, with approximately 26,000 cuts.

The four-week average of initial jobless claims fell below 200,000 for the first time since October 2022, indicating a low level of layoffs.

Andy Challenger, workplace expert and chief revenue officer for Challenger, Gray & Christmas, noted a significant slowdown in layoffs this summer. Layoff announcements primarily continue in the tech sector, with artificial intelligence being the primary driver, accounting for 33% of job cuts in July, as per Challenger. However, AI-related layoffs remain concentrated within the technology industry.

Despite the decline in layoffs, recently unemployed workers are finding jobs as quickly as the economy generates new positions, stated Carl Weinberg, chief economist at High Frequency Economics. This suggests the labor market is balanced. While employers are refraining from firing, hiring remains modest. The number of job openings in the country is steady, though still below pre-pandemic levels.

The upcoming Labor Department release of July hiring data is expected to show a payroll gain of 97,500, according to FactSet economists' forecasts. June job growth was weaker than anticipated, with only 57,000 jobs added, weaker than expected.

Although the U.S. unemployment rate remains low at 4.2%, it is historically low, some groups still face challenges in finding employment. AI-driven corporate investment has led to a 15% decrease in entry-level corporate job listings, typically accessible to recent graduates, according to career platform Handshake. Additionally, the number of job applications per job has surged by 30%.