For the First Time, AI Is the Number One Reason Companies Are Cutting Jobs
The honest caveat is that “AI washing” is real. Companies cut for financial or strategic reasons and blame it on AI because it’s more palatable. We’ll never fully know how much is genuine automation versus narrative management. But as Challenger’s chief revenue officer Andy Challenger put it, companies are shifting budgets toward AI investments at the expense of jobs, and we’ve been watching that pattern play out across multiple reports this year. Whether AI is directly replacing the work or simply giving leadership a reason to spend less on headcount, the effect on workers is the same. Since Challenger began tracking AI as a layoff reason in 2023, the cumulative total has now reached 107,094, and that only counts large companies that announce cuts publicly. Small and medium businesses do these things quietly. The real number is almost certainly higher.
AI Isn’t Just Eliminating Jobs, It’s Erasing the Rungs on the Career Ladder
Most conversations about AI and jobs focus on which positions will disappear. A new Brookings Institution study asks a different question: what happens to the career ladder when AI removes the middle?
The research focuses on the roughly 70 million U.S. workers without four-year degrees, people who built their skills through work experience, military service, community college, or apprenticeships. Researchers call them STARs: Skilled Through Alternative Routes. Of those 70 million, 15.6 million work in jobs that are highly exposed to AI. That’s 43% of all U.S. workers in the top quartile of AI exposure.
The study breaks jobs into three tiers: Origin jobs (true entry-level roles like receptionists and cashiers), Gateway jobs (stepping-stone roles like customer service reps and administrative assistants), and Destination jobs (where people ultimately advance; sales reps, accountants, and financial managers). Gateway jobs are the bridge. They’re how a cashier eventually becomes a financial manager. And nearly 11 million workers without degrees are currently in Gateway jobs that are highly AI-exposed.
Here’s the compounding problem: it’s not just the stepping-stone jobs at risk. The researchers found that 49% of the pathways connecting Gateway jobs to Destination jobs are also highly exposed to AI. In other words, even if the jobs survive, the routes between them may not. As the study puts it, jobs function as interconnected stepping stones; disruption of a key role within a pathway alters employment opportunities both upstream and downstream. We’ve documented how entry-level hiring has contracted and how companies are demanding more experience from new hires. The Brookings research explains why that creates a structural trap: you can’t develop the experience you need if the jobs that used to build it no longer exist or no longer lead anywhere.
Three and a half million workers are in the most precarious position, highly exposed to AI and with low adaptive capacity, meaning limited savings, few transferable skills, or an unfavorable geographic location. They represent 67% of all workers in that dual-vulnerability category. Geographically, Florida stands out. Palm Bay leads at 35.5% of workers in highly exposed Gateway jobs. Orlando and Tampa are both at 32.2%. Nearly one in three workers in this metro area without a degree is in a stepping-stone job that AI could disrupt. There’s no easy policy answer here, and the researchers are candid about that. What they emphasize is that the damage will play out locally, and that local employers, training institutions, and regional policymakers will need to coordinate well before the pathways disappear entirely if they want any chance of maintaining mobility for workers who rely on them.
Weekly Claims Fell to 202,000, But the Hiring Outlook Is Getting Worse
The Department of Labor reported 202,000 initial jobless claims for the week ending March 28, down 9,000 from the prior week’s revised level of 211,000. The four-week moving average fell to 207,750, down 3,000. The insured unemployment rate held at 1.2%. Continuing claims rose slightly to 1,841,000, but the four-week moving average for that figure dropped to 1,838,750, the lowest level since September 2024. Total claims across all programs came in at 2,067,717, down about 64,000 from the prior week and below year-ago levels.
On the surface, that all reads as positive. Low claims, declining averages, better than last year. But context matters, and the Chicago Fed’s labor market indicators provide it. As of the March 26 release, the Chicago Fed’s real-time model puts the unemployment rate forecast for March at 4.46%, up from the BLS reading of 4.4% in February, with 53% odds that the official rate will increase when BLS reports on Friday. The driver isn’t layoffs… It’s hiring. The Chicago Fed’s hiring rate for unemployed workers has been declining for three consecutive months, indicating that unemployed workers are finding jobs at a slower pace than at the start of the year. Low layoffs and a weak hiring rate can coexist comfortably, and that’s exactly what we’ve been tracking since the February JOLTS report confirmed the hiring rate hit its lowest level since COVID. The floor is holding. The ceiling isn’t rising. And the BLS jobs report tomorrow will tell us where things actually stand.
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Frequently Asked Questions
Challenger has been tracking AI as a stated reason for cuts since 2023, when it accounted for just 5% of full-year layoffs. It rose to 10% in February 2026, then jumped to 25% in March alone. Some of that acceleration is genuine AI-driven restructuring; some may be companies using AI as convenient framing for cuts they’d have made anyway. Either way, the trend line is real and accelerating.
Gateway jobs are mid-level stepping-stone roles (customer service reps, administrative assistants, office support) that historically allow workers to build skills and advance into higher-paying careers. The Brookings study finds that nearly 11 million workers without degrees hold Gateway jobs that are highly AI-exposed. If those roles shrink or disappear, the bridge between entry-level work and better-paying careers disappears with them.
Claims at 202,000 are historically low, which means layoffs remain contained. But low layoffs don’t equal a strong job market. The Chicago Fed’s hiring rate for unemployed workers has been declining for three straight months, meaning people who lose jobs are finding new ones more slowly. The combination of low firing and weak hiring is exactly the “low-hire, low-fire” environment that’s defined 2026.
Brookings identifies the Northeast and Sun Belt as most exposed, given concentrations of administrative, clerical, and customer service Gateway jobs in those areas. Florida metros stand out specifically: Palm Bay at 35.5% and Orlando and Tampa at 32.2%. These figures represent the share of workers without degrees in Gateway jobs that are highly AI-exposed, nearly one in three in those Florida metros.
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March Challenger Report: 60,620 cuts, AI leads as the top stated reason for the first time
Welcome back to Cornering the Job Market. Today’s headlines include a new Brookings study that shows what happens to workers without degrees when AI wipes out the middle of the career ladder. Plus, weekly jobless claims fell again, but the real question is what the next 90 days will look like. But first, Challenger Grain Christmas released its March Job Cut Report this morning. U.S. employers announced 60,620 layoffs last month. That is up 25% from February’s 48,307. It’s down 78% from March of last year, but that comparison is somewhat misleading because March 2025 was inflated by massive federal workforce cuts.
If you strip those out, the pattern looks very similar year over year. But here’s the number that matters most. And it’s somewhat controversial. AI was the number one reason companies gave for cutting jobs in March. AI accounted for 25% of all cuts. And a lot of people will hear that and just assume it’s AI washing, that companies are making cuts for different reasons, but they’re blaming it on AI because it doesn’t sound as bad. The truth is, we’ll never really know, but there’s no denying the fact that AI continues to become more prevalent in the workplace, and it’s inevitable that it will impact jobs. For context, in February, AI accounted for 10% of cuts. For all of 2025, it was just 5%. So we’ve gone from 5% to 10% to now 25% in a matter of months. That trend line is undeniably accelerating.
And even if the job cuts aren’t AI replacing people, I think everyone would agree at this point that AI investments are giving companies a reason to spend less money on their employees. Whether it works out over time is very much to be determined, but that is what’s happening. And Andy Challenger, the firm’s chief revenue officer, agrees with that. He said companies are shifting budgets toward AI investments at the expense of jobs. Since Challenger started tracking AI as a reason for cuts in 2023, the cumulative total has now hit over 107,000. And those are just the ones companies publicly attribute to AI. And when you stop and think about it, that’s only large companies. Small to medium businesses do these things quietly.
There’s no forum for them announcing these kind of things publicly. And I know from many conversations, firsthand experience, this is happening at scale. Small companies move faster. They’re more agile, they’re more flexible, they’re more willing to take risks with things like AI. So I believe the real number is significantly higher than what’s being reported. Looking at the industry breakdown, tech led the first quarter with 52,050 cuts, which is up 40% from last year. Dell, Oracle, and Meta’s reality labs were the big names. March alone saw 18,720 tech layoffs. Transportation was second with more than 32,000 cuts, which is up 703% year over year. It’s the highest Q1 total on record for that sector. The ongoing war in Iran is squeezing airlines and shipping companies hard right now. Healthcare hit a Q1 record at 23,520 cuts. Looking at the first full quarter, 217,362 total cuts were announced.
That’s actually the lowest Q1 since 2022 and down 56% from Q1 last year. So the overall number is lower, but the composition is shifting. AI is taking a bigger and bigger share of the pie. Andy Challenger made a point worth repeating. He said companies are now including goals for workers on AI use and redefining job descriptions based on what AI can do. What that tells us is the jobs coming back won’t look like the jobs that are going away. So workers really need to understand what AI can do, understand prompting, understand AI agents, what those are all about, and learn how to take advantage of using it to elevate what you do, whatever it is you do.
Brookings: How AI may erase the rungs on the career ladder for 70 million workers
Moving on to the next story, a new study from Brookings looks at AI from an angle most reports don’t reference. It’s not asking which jobs will AI replace, it’s asking what happens to the career ladder when AI takes out the middle rungs. This is an interesting new angle because we’ve already talked a lot about how much AI is displacing jobs at the bottom of the ladder. Here’s what’s going on. The US has about 70 million workers without a four-year degree. The researchers call them stars, and that stands for skilled through alternative routes. These are people who built their skills through work experience, military service, apprenticeships, or community college.
Of those 70 million, 15.6 million work in jobs that are highly exposed to AI. That accounts for 43% of all U.S. workers in the most AI exposed roles. The study breaks jobs into three tiers: origin jobs at the bottom, true entry level, like a receptionist or a cashier, gateway jobs are in the middle, those are stepping stones. So customer service reps, administrative assistance, office support jobs, and then destination jobs are what people ultimately advance to, sales reps or accountants, and even financial managers. Currently, nearly 11 million workers without degrees are in those gateway jobs that are highly exposed to AI. If AI shrinks or eliminates them, the workers will lose the bridge between entry-level work and better paying careers.
And there’s a compounding problem with this. 49% of the pathways between gateway and destination jobs are highly exposed to AI. So it’s not just the stepping stone jobs that are at risk, it’s the routes between them. The researchers wrote jobs function as interconnected stepping stones. So the disruption of a key role within a pathway can alter employment opportunities both upstream and downstream. Three and a half million workers are in the worst spot. They’re highly exposed to AI and they have low adaptive capacity, which means they have limited savings, very few transferable skills, or they’re in an unfavorable geographic location. They make up 67% of all workers in that dual vulnerability category. Most people tend to think about AI job loss as a straight line where you have a job and then you don’t, but this research shows the real damage might be structural. If AI hollows out customer service and administrative positions, how does someone like a cashier ever get to become a financial manager?
The path starts to disappear and there’s really no replacement being built yet. There’s a geographic angle here too. Florida is heavily concentrated with at-risk workers. Palm Bay leads at 35.5%, and Orlando and Tampa are both at 32.2%. Living in Orlando, that number hits particularly hard. Nearly one in three workers here without a degree are in a stepping stone job that AI could disrupt. This is a big problem. It doesn’t seem to have a clear solution. I’m not sure that there’s any entity that exists to work on it or solve it. This is what is actually happening. So at the very least, I hope this report gets a lot of attention. It certainly deserves it.
Weekly Jobless Claims: 202,000 for March 28; low layoffs, weakening hiring
Moving on to our next story, the Department of Labor reported 202,000 new unemployment claims for the week ending March 28th. That’s down 9,000 from the previous week. The four-week moving average fell to 207,750, which is down 3,000. The insured unemployment rate held steady at 1.2%. For continuing claims, and those are the people who were already collecting benefits, that number rose to 1,841,000, but the four-week moving average dropped to 1,838,750, which is the lowest level since September 2024. On the surface, that’s a genuinely positive signal. Total claims came in at 2,067,717, which is down about 64,000 from the prior week and below the year-ago level. One more data point that dropped today, which because that all sounds good, right?
Chicago Fed Model: 53% odds the unemployment rate rises on Friday
But let me bring it down a little bit, because unfortunately that’s what I do too often lately. The Chicago Fed released its real-time unemployment rate forecast for March. Their model puts it at 4.49%, which is up from February’s 4.44%. And the driver from that is hiring of unemployed workers has slowed. The Chicago Feds hiring rate fell to 44.79%, down from just over 46% in February, and 46.5% in January. So we’ve seen three straight months of decline. The Fed’s model gives 61% odds that the official unemployment rate will go up when BLS reports on Friday. That happens to be tomorrow, and I will share it as soon as it becomes available. Those are the headlines for today.
Fun fact: Flight attendants originally had to be certified nurses
But before we close, here’s the work-related fun fact. As always, I promise to deliver. And based on all the emergencies you see on planes, we see those videos now. As soon as they happen, they’re posted all over Twitter. I still call it Twitter. Yes, I can’t do X. And all the social media uh channels, and there’s always problems on planes with people you know collapsing and bad things happening. So it would it would make sense. I’m surprised they still don’t have that requirement today to have a healthcare professional on every big flight. But interesting fact, I like this one today. Thank you for listening. Please like, subscribe, and share with anyone who you think might be interested. And I very much look forward to talking to you tomorrow.
