In this articleTGTUPSAMZNFollow your favorite stocksCREATE FREE ACCOUNTCorporate America is getting rocked by historic rounds of white-collar layoffs, leading some to wonder: Has AI finally come for their jobs?While the proliferation of generative and agentic artificial intelligence is playing a role, recent job cut announcements from companies like Amazon, UPS and Target are about a lot more than just the advance of new technology. The firms, which each announced layoffs in recent weeks totaling more than 60,000 roles eliminated this year, said they’re trying to cut corporate bloat, streamline operations and adjust to new business models.But in the absence of the Bureau of Labor Statistics’ monthly jobs report, which has gone dark amid the government shutdown, the layoff announcements have raised questions about the strength of the labor market and if it’s the start of an AI-driven, white-collar recession. Some companies have outright said they’re replacing workers with AI. Klarna CEO Sebastian Siemiatkowski said in May the company was able to shrink its head count by about 40%, in part because of AI. Duolingo said in April it’ll stop using contractors for work that AI can handle. Salesforce laid off 4,000 customer support roles in September, saying that AI can do 50% of the work at the company.But experts interviewed by CNBC said some companies could be “AI-washing” their job cuts, blaming layoffs on the new technology to cover up business fumbles and old-fashioned cost cutting.”We spend a lot of time looking carefully at companies that are actually trying to implement AI, and there’s very little evidence that it cuts jobs anywhere near like the level that we’re talking about. In most cases, it doesn’t cut head count at all,” said Peter Cappelli, a professor of management at the Wharton School and director of its Center for Human Resources. “Using AI and introducing it to save jobs turns out to be an enormously complicated and time-consuming exercise. … There’s still a perception that it’s simple and easy and cheap to do, and it’s really not.” Still, the cuts, which come after a string of layoffs across the tech industry, have cast a dark cloud on a teetering economy that’s been wracked by persistent inflation, rising delinquencies, falling consumer sentiment and an average effective tariff rate that’s at its highest level in nearly a century, according to estimates from The Budget Lab at Yale University.The growing pile of bad news has done little to shock the stock market, which is at near-record highs, but that’s largely because it’s been buoyed in part by AI megacaps.Cappelli attributed the recent surge in layoff announcements to concerns about the state of the economy. He also noted a likely “bandwagon” effect in which companies see their competitors cutting so they too start making cuts. “If it looks like everybody is cutting, then you say, ‘They must know something we don’t know,'” said Cappelli. He added investors often reward cutting: “They want to hear that you’re cutting because it looks like you’re doing something good. It looks like becoming more efficient.”To be sure, AI and automation are potentially enabling some of the cuts, and the emerging technology is poised to help all companies reduce costs and boost efficiency in the coming years. But the reasons behind each layoff and the role AI is playing are nuanced, and vary company by company.Starbucks’ decision to cut around 2,000 corporate jobs in two rounds this year is related to slowing sales at the company and a larger turnaround effort led by its new CEO, Brian Niccol. Layoffs at Meta’s AI unit, which impacted around 600 jobs, came as the company said it wants to operate more nimbly and reduce layers. Intel’s decision to lay off about 15% of its workforce came after it overinvested in chip manufacturing without adequate demand. Together, they represent what John Challenger, CEO of job placement firm Challenger, Gray & Christmas, described as a turning point in the economy and job market.”We were in this no-hire, no-fire, type of zone. Economy was moving ahead. The labor markets were feeling pressure, but certainly, unemployment had stayed relatively strong,” he said. “These job cuts do suggest that the dam may be breaking as the economy slows.”The earliest signals, he said, could be coming from retail, shipping and distribution.The world’s largest startup During the Covid-19 pandemic, Amazon went on a hiring spree in part to meet a surge in demand for e-commerce and cloud computing services, leading its corporate and front-line workforces to more than double to 1.3 million employees between 2019 and 2020. By 2021, the company had swelled to 1.6 million employees globally, the same year Andy Jassy succeeded Jeff Bezos as CEO. Since taking over, Jassy has been trying to undo some of that work.Last week’s layoff announcement, impacting 14,000 corporate jobs, is expected to be the largest in the company’s history and to affect nearly every unit in the company. It marks Amazon’s second round of cuts in three years and amounts to more than 41,000 corporate job cuts since 2022, with more potentially on the way come 2026.Though AI is part of the picture, there’s more at work behind the reductions.Jassy said in the days following the announcement that the changes were neither AI- nor financially driven, but were instead to cut corporate fat so the company can operate as the world’s largest startup.Amazon said it’s not replacing workers with AI, at least not yet, but it does need to cut employees so it can invest in the technology. As those costs come down, Amazon has earmarked hefty investments in cloud infrastructure to support AI workloads while simultaneously pushing out a flurry of AI services and tools across the company. It’s contributed to a rise in capital expenditures, which are now expected to reach $125 billion this year, up from a prior forecast of $118 billion.Jassy said previously that the company’s workforce would shrink in the future as a result of its embrace of generative AI but it still plans to keep hiring in “key strategic areas.” Over time, the company will need “fewer people doing some of the jobs that are being done today” but “more people doing other types of jobs,” Jassy said in June. The cuts are also part of a larger goal of Jassy’s to make the company more nimble, reduce bureaucracy and remove layers so it can operate faster and smarter. “It’s culture,” Jassy said during Amazon’s quarterly earnings call Thursday. “If you grow as fast as we did for several years, you know, the size of the businesses, the number of people, the number of locations, the types of businesses you’re in, you end up with a lot more people than what you had before, and you end up with a lot more layers.”Smart money In January, UPS announced a major change in its strategy.The logistics firm said it was going to pare down its relationship with its largest customer, Amazon, in favor of higher-margin businesses that require fewer people to operate. In fiscal 2024, Amazon shipments represented nearly 12% of revenue for UPS. The logistics giant said it was pl …
