Key Takeaways

  • U.S. employers announced 153,074 job cuts in October, up 175% year over year, partly attributed to AI-driven automation, according to a report released Thursday by outplacement firm Challenger, Gray & Christmas.
  • Cost cutting was the top reason for private-sector layoffs last month, with AI adoption ranking second. The research noted that the tech industry continues to lead private-sector layoffs amid AI integration, slowing demand, and "efficiency pressures."
  • "Some industries are correcting after the pandemic hiring boom, but at the same time, the proliferation of AI applications, slowing consumer and corporate spending, and rising costs are pushing companies to tighten budgets and freeze hiring," Andy Challenger, chief revenue officer of the Illinois-based outplacement firm headquartered in Chicago, said in the report.

Deep Dive

Federal Reserve Chair Jerome Powell said last week that Fed policymakers are watching "very carefully" the trend of AI increasingly becoming a factor in corporate layoffs. "It's certainly possible that it has an impact on job creation. We haven't seen it prominently in the initial claims data yet," he said at a press conference after the Fed announced another round of rate cuts, which cited a softening labor market.

From January through October, U.S. employers announced a cumulative 1.1 million layoffs, the highest for that period since 2020, when 2.3 million cuts were announced, according to the Challenger report. Last month's cuts rose 183% sequentially from the 54,064 announced in September.

"Workers who are laid off now are finding it harder to quickly land new positions, which could further loosen the labor market," the Challenger chief revenue officer said.

IBM plans to cut thousands of jobs in the fourth quarter, according to a report Wednesday from CIO Dive, a sister publication of CFO Dive. "We are executing an action in the fourth quarter that will impact a low-single-digit percentage of our global workforce," the company said in an emailed statement to CFO Dive. "While this may impact some U.S. roles, we expect U.S. headcount to be flat year over year." IBM had a total workforce of 270,000 as of December 2024, according to its latest annual report.

Meanwhile, Amazon announced last month it would cut up to 14,000 jobs. "Some may ask why we are reducing headcount when the company is performing well," Beth Galetti, Amazon's senior vice president of People Experience and Technology, said in an Oct. 28 letter to employees, which was later posted on the company's website. She explained that the tech giant is "innovating at a rapid pace" and needs to "organize in a leaner way, with fewer layers and more ownership, so we can move as fast as possible." Galetti added, "This generation of AI is the most transformative technology we've seen since the internet, and it's enabling businesses to innovate at unprecedented speed, both in existing markets and entirely new ones."

Amazon CEO Andy Jassy drew criticism over the summer for an internal memo, later made public, predicting that AI would shrink the company's workforce in the coming years. An Amazon spokesperson said AI was not the reason for the "vast majority" of the layoffs announced last week. "Over the past year, we set out to strengthen our culture and teams by reducing layers, increasing ownership, and reducing bureaucracy to improve speed and accountability, and to prepare for invention, collaboration, connection, and delivering the best for customers," the spokesperson said in an email. "This effort is already showing results, and we are seeing strong outcomes for teams and customers."

Other companies announcing significant layoffs in October, in addition to Amazon, included Target, Paramount, United Parcel Service, and Charter Communications, according to news reports.

The Department of Government Efficiency has been a major driver of layoffs this year, with related announcements reaching 293,753 through October, encompassing direct cuts to the federal workforce and its contractors, according to the Challenger report.

Among private-sector employers, cost cutting was the top reason for October layoffs, leading to 50,437 announced cuts. AI adoption ranked second, resulting in 31,039 job losses. Year to date, AI has been cited as the reason for 48,414 layoffs.

A study released in late August by researchers at the Federal Reserve Bank of St. Louis showed that occupations with high AI adoption have experienced significant increases in unemployment in recent years. "Our results suggest that we may be witnessing the early stages of AI-driven job displacement," the authors wrote.