Is AI Leading to Layoffs or Does the Economy Just Suck?

It’s not a particularly good time to be a (human) worker in America. Tens of thousands of people have been laid off over the past several days, and the general outlook for job-seekers appears grim, to say the least. This week, Amazon announced plans to neutralize some 14,000 positions, while Meta said it would purge several hundred people from various offices throughout California and Washington state. Chegg, the online learning platform, announced plans to reduce its workforce by a whopping 45 percent on Monday. Several other large American companies—including FedEx, Paramount, General Motors, Target, and UPS—similarly announced plans to eliminate jobs.

The consensus seems to be that this sudden employment blood bath may just be the birthing pangs of the new AI age—a time in which jobs are no longer an indicator of economic success, I guess. Headlines about the layoffs have routinely included AI as a factor, a trend encouraged by the companies themselves. Indeed, in Amazon’s announcement about its new downsizing, the company’s executive, Beth Galetti, cited AI, noting that the company needs to be “organized more leanly, with fewer layers and more ownership, to move as quickly as possible for our customers and business.” Similarly, in its layoffs announcement, Chegg cited the “new realities of AI” as a factor.

But is it really AI’s fault, or is it just the case that the American economy is currently riding a one-way ticket to the trash heap? Is an AI-ified economy one with fewer jobs? Or does a bad economy just mean more AI? Or are the companies suffering from other ailments and simply leaning into the AI narrative for cover?

NBC News recently interviewed an economic scholar who seemed skeptical of the narrative surrounding job loss and AI. “It’s much easier for a company to say, ‘We are laying workers off because we’re realizing AI-related efficiencies’ than to say ‘We’re laying people off because we’re not that profitable or bloated, or facing a slowing economic environment, etc,’” David Autor, a professor of economics at the Massachusetts Institute of Technology, said. “Whether or not AI were the reason, you’d be wise to attribute the credit/blame to AI,” he added.

BBC, meanwhile, recently interviewed Martha Gimbel, executive director of the Budget Lab at Yale University, who felt that the AI talk was overblown. “A lot of this conversation feels very different to people because the phrase AI is in it,” Gimbel told the outlet. “But so far, nothing that I’ve seen looks different than typical patterns of companies hiring and firing, particularly at this point in an economic cycle.”

In other words, companies may be simply saving face by pretending that losing team members and downsizing is really just part of a glorious pivot towards “leaner,” “more efficient” automation. In reality, these companies may be hurting and may be taking advantage of the current narrative around AI to spin that hurt into PR gold.

If you’re a large company, you’d be forgiven for not feeling your best these days. Indeed, the indicators for the U.S. economy right now are, in a word, bad. Conveniently for Trump, the U.S. government continues to be shut down, which means that the organizations that would traditionally monitor and report on the nation’s economic health (like the Fed) are unable to do their jobs. However, even without official government analysis, financial experts are expressing skepticism about the health of the economy.

For instance, Morningstar, a financial services firm that specializes in economic analysis, recently noted that U.S. GDP growth in the first half of 2025 was lower than in previous years, and that this growth slump is expected to continue for the foreseeable future, with consumers becoming more and more cautious about spending. Additionally, consumer sentiment and the strength of the labor market have both been weakening, the report says, citing the most recent job growth data provided by the government:

There are multiple ways to look at the health of the US labor market, which is tied to the overall health of the economy. Job growth is a primary indicator…The US economy added just 22,000 jobs in August as unemployment continued to rise. That number is well below what economists had previously expected and the 79,000 reported in July. The revised June numbers from the Bureau of Labor Statistics show that the US economy lost 13,000 jobs in June.

The report also notes that inflation has continued to stick around, and the price of goods has shot up “in response to tariffs, as producers started passing along higher import prices.”

In short, due to the Trump administration’s bizarre policies, there is a lot of economic uncertainty right now, and uncertainty, as we all know, isn’t great for markets. As an example, next month, the Supreme Court is set to rule on whether Trump’s tariffs—which have been challenged by lawsuits—are legal or not. If they prove to be illegal, the Trump administration may have to facilitate the repayment of all of the revenue generated by those tariffs, which would be logistically insane and a hugely disruptive process for the federal government. As we all know, uncertainty is, itself, not great for an economy, since, to confidently maneuver and make money, businesses need to know that they can put one foot in front of the other without falling down a manhole.

So are layoffs happening because more companies are adopting AI or because the economy is doing poorly? Or for some other reason? From the outside, it’s impossible to tell, but suffice it to say, there is definitely more than one possible explanation for why companies are currently shedding jobs like nobody’s business. The situation may be more mundane