Artificial intelligence is rapidly reshaping the US labor market, with employers increasingly citing the technology as a reason for workforce reductions even as hiring continues in parts of the economy.
US-based employers announced 97,006 job cuts in May, according to a report released Thursday by global outplacement and executive coaching firm Challenger, Gray & Christmas.
The figure was up 16% from April’s 83,387 cuts and 3% higher than the 93,816 announced in May last year.
The latest reading marks the highest number of layoffs announced in the month of May since 2020, when the Covid-19 pandemic triggered unprecedented workforce reductions.
It also extends a three-month streak of rising job cuts, which have climbed steadily from 48,307 in February.
Although overall layoffs remain well below the elevated levels seen in 2025, the composition of the cuts is changing in ways that are attracting growing attention from economists and investors.
The biggest shift is the increasing role of artificial intelligence.
AI becomes the dominant explanation for workforce reductions
For the third consecutive month, artificial intelligence was the leading reason cited for job cuts.
Employers attributed 38,579 layoffs to AI in May, the highest monthly total ever recorded by Challenger since it began tracking AI-related job losses in 2023.
The figure accounted for roughly 40% of all layoffs announced during the month.
The trend has accelerated sharply this year.
AI-related layoffs represented just 7% of announced cuts in January before rising to 25% in March and 26% in April.
So far in 2026, employers have linked 87,714 job cuts to artificial intelligence, representing 22% of all announced layoffs.
Source: Challenger, Gray & Christmas
That figure has already exceeded the 54,836 AI-related cuts recorded during the entirety 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 of Challenger, Gray & Christmas.
“Technology, already the year’s biggest job cutter, saw its steepest month of cuts since early 2023, even as it remains the sector with the most hiring plans this year,” he added.
Challenger said the current data suggests AI is no longer a future concern but an active force influencing workforce decisions across corporate America.
“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. The open question isn’t whether AI changes the workforce, but how fast.”
Technology sector leads both layoffs and hiring
The technology sector remained the largest contributor to workforce reductions.
Tech employers announced 38,242 job cuts in May, while year-to-date reductions reached 123,653.
That represents a 66% increase from the 74,716 cuts announced during the same period last year.
Several prominent technology companies have recently linked workforce restructuring efforts to AI adoption.
Late last month, Meta Chief Executive Mark Zuckerberg described AI as “the most consequential technology of our lifetimes” in a memo discussing the company’s decision to cut thousands of jobs.
Meta, Coinbase, and Block have each eliminated at least 10% of their workforces in recent months while pointing to artificial intelligence as one factor behind their restructuring efforts.
Combined, the three companies have cut roughly 13,000 positions.
Yet technology is also the leading source of hiring plans.
Through May, employers announced 80,472 planned hires across all sectors, slightly above the 79,741 announced during the same period last year.
Technology led the way with 11,250 planned hires in May alone.
The contrast highlights a growing divide within the sector as companies eliminate some roles while creating demand for new AI-related skills.
Restructuring and profitability concerns also at play
Not all analysts believe AI is solely responsible for the latest wave of layoffs.
Some argue that companies are using the excitement surrounding artificial intelligence to justify cost-cutting measures that may have occurred regardless of technological developments.
“Cutting jobs to make way for AI is a nice excuse, but some of these aren’t necessarily the best, most well-run companies,” Evercore analyst Mark Mahaney said in a recent New York Times report.
“They may have overhired, or they may be losing market share. There may be other issues.”
Examples of this dynamic have emerged across the technology sector.
When Snap announced the elimination of approximately 1,000 jobs in April, Chief Executive Evan Spiegel cited profitability concerns while also emphasizing the productivity benefits created by AI tools.
Meta’s workforce reductions have similarly coincided with a strategic pivot away from its metaverse ambitions and toward artificial intelligence infrastructure.
The company doubled its workforce between 2019 and 2022 as it invested heavily in virtual and augmented reality initiatives.
Since then, Meta has steadily reduced headcount while increasing spending on AI.
In April, the company projected capital expenditures of between $125 billion and $145 billion this year, more than double last year’s spending, largely to fund AI infrastructure such as data centers.
The announcement came shortly before Meta disclosed another round of layoffs affecting roughly 8,000 employees despite quarterly profits approaching $27 billion.
Other sectors see rising workforce reductions
Outside of technology, transportation emerged as the second-largest source of layoffs.
The sector announced 6,909 job cuts in May and 40,388 cuts through the first five months of the year, representing a 449% increase from the same period in 2025.
Healthcare and health products manufacturers have announced 30,414 cuts so far this year, up 17% year over year.
Meanwhile, services-sector layoffs totaled 17,065 for the year, a 61% decline from 2025 levels.
Employers also cited a range of additional factors behind workforce reductions.
Market and economic conditions were blamed for 69,645 layoffs through May, while business closures accounted for 66,733 cuts.
Bankruptcy-related job losses reached 5,637 in May, the highest monthly total since February 2025.
Layoffs tied to acquisitions and mergers surged to 11,989 this year, more than six times the level recorded during the same period in 2025.
According to Challenger, the increase in merger-related and bankruptcy-related layoffs suggests many companies are aggressively restructuring while preparing for an economy increasingly shaped by artificial intelligence.
“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.
This post AI drives 40% of May layoffs as job cuts hit highest level since 2020 may be modified as updates unfold
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