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

Layoffs across the U.S. in July fell to their lowest level in two years, new data shows, a sign that the labor market remains resilient despite the impact of inflation driven by the Iran war and artificial intelligence. 

Employers announced 33,429 job cuts in July, down 46% from a year ago, according to outplacement firm Challenger, Gray & Christmas. The number of layoffs last month was the lowest since July 2024, when roughly 26,000 cuts were announced.

A decrease in the number of Americans filing for weekly unemployment benefits also indicates a low level of layoffs. The four-week average of initial jobless claims is now below 200,000 for the first time since October 2022, according to PNC Economics Research. 

"The pace of layoffs fell dramatically this summer," Andy Challenger, workplace expert and chief revenue officer for Challenger, Gray & Christmas, said in a statement. "Layoff plans continue to be announced primarily in tech, and artificial intelligence is still the story, as investments in the technology reshape organizations."

According to Challenger, AI has been the leading cause of layoffs for five straight months, accounting for 33% of job cuts in July. But AI-related layoffs remain mostly concentrated in the technology industry, economists note. 

"Recently laid-off workers are finding jobs as fast as the economy is creating new ones," Carl Weinberg, chief economist at High Frequency Economics, said in a research note. "That suggests the labor market is still balanced."

While employers have refrained from firing, hiring remains modest. Government labor data shows that the number of job openings across the country is steady but still below its pre-pandemic level. 

The Labor Department on Friday is scheduled to release hiring data for July. Economists polled by FactSet forecast a payroll gain of 97,500. Employers added only 57,000 jobs in June, weaker than forecasters expected. 

Although the nation's unemployment rate is low by historical standards, at 4.2%, some groups report difficulty finding jobs. Amid increasing corporate investment in AI, job listings for entry-level corporate roles traditionally available to recent college graduates have fallen 15%, according to career platform Handshake. Meanwhile, the number of applications per job has surged 30%.