Artificial intelligence innovations are reshaping the U.S. labor market, directly contributing to significant job cuts and accelerating a demographic transformation that impacts the native working class. Through April, AI had been cited for 49,135 cuts, representing approximately 16% of all announced layoffs during that period.
AI led all reasons for job cuts for the second month in a row. U.S. tech companies announced 33,361 job cuts in April, accounting for about 40% of the 83,387 cuts announced across all industries. This technological shift is occurring as the U.S. population is aging, and net immigration has fallen sharply because of Trump administration policies of immigration restrictions and mass deportations.
The Cost to Native Labor
The labor market is in the throes of an evolution, with Nicole Bachaud, a labor economist at ZipRecruiter, stating, "The labor market is absolutely transforming, and it’s not going to look the same as our pre-2020 trends." Bachaud further noted that there is not yet a clear picture of what the new normal entails. This transformation, driven by AI, contributes to changes in the occupational mix and has been directly cited as a reason or scapegoat for layoffs, while also showing potential to influence productivity and wages.
Joe Brusuelas, chief economist at RSM US, indicated a shift in how labor market health is assessed, saying, "In fact, we moved away from really placing an emphasis on any given month, and we’re looking at a smooth three-month average now." Brusuelas set his "speed limit for hiring" at approximately 25,000 jobs per month. The U.S. economy added an estimated 160,000 jobs in January, lost 133,000 jobs in February, and rebounded in March with 178,000 jobs created. The average monthly gain from January through March stood at 68,333.
Elite Interests and Economic Transformation
While native workers face displacement, investors are rallying around companies supplying key materials to AI infrastructure. The Wall Street Journal reported that the "chip craze" is driving interest in these companies, turning a glass company and a toilet maker into AI-related stock plays as investors chase the supply chain for AI. This redirection of capital highlights the elite interests benefiting from the AI transformation, even as the broader labor market undergoes significant upheaval.
The Job Openings and Labor Turnover Survey (JOLTS) showed that hiring rose in March after falling to near-historic lows the month before. Concurrently, job openings fell for the second consecutive month. Weekly initial jobless claims remained near pre-pandemic levels, with an estimated 200,000 first-time claims for unemployment insurance benefits last week, an increase of 10,000 from the prior week, which was revised up by 1,000 to 190,000, the lowest since 2022.
Demographic Realities and Future Outlook
Ahead of the April jobs report, the U.S. labor market was expected to have added 67,000 positions, with the unemployment rate anticipated to remain at 4.3%. Gregory Daco, chief economist at EY-Parthenon, forecasted 45,000 jobs added in April. Daco wrote that the expected April gain should still surpass the breakeven pace needed to keep unemployment steady, meaning the unemployment rate is likely to tick down to 4.2%. These figures reflect a labor market in flux, where the impact of AI on the existing workforce is becoming increasingly evident amidst an aging population and reduced immigration. The combination of technological disruption and demographic shifts presents a complex challenge for the native working class, whose economic future is being fundamentally reshaped by these forces.