AI Is Now the Leading Reason Employers Cite for Layoffs

Companies are blaming AI for job cuts faster than ever.

AI has become the most frequently cited reason for job cuts in the United States for the third consecutive month, according to new data from outplacement and executive coaching firm Challenger, Gray & Christmas. Employers announced 97,006 job cuts in May, up 16% from April and the highest total for May since the early months of the COVID-19 pandemic in 2020. 

The latest figure also marks the third straight month of rising layoffs, continuing an upward trend that began in February.

Of those May cuts, 38,579 were attributed to AI, representing roughly 40% of all layoffs announced during the month. Challenger's data shows that AI-related cuts have climbed sharply throughout 2026, rising from just 7% of all announced layoffs in January.

So far this year, companies have cited AI in 87,714 job cuts, already surpassing the 54,836 AI-related layoffs recorded in all of 2025.

"The labor market is being reshaped by technology in real time. AI is now the leading reason companies give for cutting jobs and the primary industry citing it is Technology," said Andy Challenger, labor and workplace expert and chief revenue officer at Challenger, Gray & Christmas.

Technology sector leads layoffs

The technology industry remains the largest source of job cuts in 2026.

Tech companies announced 38,242 layoffs in May alone, the sector's highest monthly total since August 2024. Through the first five months of the year, technology firms have announced 123,653 job cuts, a 66% increase compared to the same period last year.

At the same time, the sector continues to lead hiring plans, highlighting the uneven way AI is reshaping employment. While some roles are disappearing, companies are still adding workers in other areas tied to emerging technologies and business priorities.

"AI isn't yet the jobpocalypse some predicted. Like spreadsheets and email before it, the technology will ultimately make workers more productive, but our data shows companies are already acting on it, citing AI for more cuts than any other reason," Challenger said. "The open question isn't whether AI changes the workforce, but how fast."

Other industries feel the pressure

While technology dominated the layoff numbers, several other sectors also reported significant reductions.

Transportation companies announced 6,909 cuts in May, bringing the industry's total for the year to 40,388. Healthcare and healthcare products manufacturers have reported more than 30,000 cuts so far in 2026, while service-sector employers have announced over 17,000 layoffs.

FinTech firms also reported notable workforce reductions in May, with many of those announcements specifically citing AI.

Beyond AI, companies pointed to a range of economic pressures. Bankruptcy-related layoffs accounted for 5,637 job cuts in May, while business closures and restructuring efforts also contributed significantly to workforce reductions.

According to Challenger, cuts tied to mergers and acquisitions have surged this year, reaching nearly 12,000 through May, more than six times the level recorded during the same period in 2025.

"On top of the headline AI story, we're seeing a sharp rise in cuts tied to acquisitions and mergers and a jump in bankruptcy-related losses, which tells me companies are restructuring aggressively as they reposition for an AI-driven economy," Challenger said.

Experts urge caution on AI claims

Not everyone is convinced that AI is directly responsible for every layoff attributed to it.

Several labor market experts have warned that some companies may be overstating AI's role in workforce reductions. The practice has been referred to by some observers as "AI washing," where businesses cite AI as a justification for cuts that may actually be driven by broader cost-cutting efforts, restructuring plans, or slowing growth.

Economists have also noted that overall labor market conditions remain relatively stable despite the rise in AI-linked layoffs. Some experts say the impact remains concentrated in specific industries, particularly technology, rather than spreading evenly across the broader economy.

Hiring continues, challenges remain

Despite rising layoffs, hiring has not stopped entirely. US employers announced more than 80,000 planned hires through May, slightly ahead of the same period last year. Technology-led hiring announcements in May, followed by electronics and insurance.

Still, Challenger described hiring levels as historically low compared with pre-pandemic norms. For workers, the challenge may not simply be finding jobs, but finding jobs that match their skills. As some occupations shrink and others expand, labor market experts say many employees may need to adapt by transferring their skills into growing sectors.

Also read: A leaked Meta all-hands recording raised questions about employee monitoring, AI training, and layoffs.