US job cuts plunge 40%: Why AI is still putting workers on the chopping block

The comparable figure for 2026 remains the second-highest first-half total since 2020, showing continued pressure on the US workforce. The report also found an increase in employers' hiring plans, suggesting that companies are continuing to recruit even as they restructure their operations and manage costs. AI leads reasons for job cuts Artificial intelligence was the most frequently cited reason for job cuts in the first half of 2026, accounting for 101,743 announced reductions, or around 23% of the total.

Market and economic conditions ranked second, with 82,115 cuts, followed by company closures, which accounted for 78,570. Restructuring was responsible for 54,661 job cuts, contract losses accounted for 38,755. Cost-cutting measures led to another 34,218 reductions. Other reasons included acquisitions and mergers (12,667 cuts), voluntary severance and buyouts (9,819), bankruptcy (9,229), and declining demand (8,448).

Challenger, Gray & Christmas said artificial intelligence was changing how companies approached workforce planning, with businesses restructuring operations, automating roles and shifting budgets towards new capabilities. The findings indicate that AI-related job reductions are not limited to technology companies. Businesses across industries are reassessing staffing requirements as they adopt new tools and change how work is performed.

Technology sector faces rising layoffs The technology sector recorded a sharp increase in layoffs. Technology companies announced 139,156 job cuts in the first half of 2026, an increase of 83% from the same period last year. The sector recorded 15,503 cuts in June alone, indicating the continued impact of restructuring and changes in workforce requirements. Transportation was the next most affected sector, with 40,970 announced job cuts, followed by healthcare with 33,175.

The services sector recorded 2,361 cuts, while government job losses stood at 17,790. Government layoffs were a major contributor to the previous year's figures. The sector recorded 288,628 job cuts in the first half of 2025, significantly higher than the 2026 total. The regional distribution of layoffs also changed. The Western US recorded 183,400 job cuts in the first half of 2026, slightly higher than the previous year.

The East recorded 90,495 cuts, down sharply from 421,330 in the same period of 2025. The South reported 102,518 job cuts. The increase shows that some employers are continuing to expand their workforces even as others reduce headcount. However, hiring intentions do not necessarily translate into completed recruitment, and the overall outlook remains dependent on economic conditions and business decisions.

The trend continued through the first nine months of the year. Employers announced plans to hire 210,612 workers, up 3% from the same period in 2025. "Hiring plans are up over the year, but we're not seeing the surge of hiring plans that come with the holiday season, which suggests a very cautious approach," Andy Challenger, workplace expert and chief revenue officer at Challenger, Gray & Christmas, said in a statement.

Seasonal recruitment plans have also weakened. Spirit Halloween and Michaels announced plans to add 62,000 seasonal workers in 2026, down from 100,800 last year, according to the firm. September and October are usually important months for hiring announcements in the US. Employers announced plans to hire just over 400,000 workers during these two months in 2025, compared with around 670,000 in 2024.

Recruitment activity during this period could provide a clearer indication of how employers expect to approach staffing towards the end of the year. September data points to a stable labour market More recent figures indicate that layoffs have continued to ease. US employers announced 573,195 job cuts through September 2026, nearly 40% fewer than during the first nine months of 2025, according to Challenger, Gray & Christmas.

In September, announced job cuts fell 20% from a year earlier to 43,281, the lowest monthly level in four years, the firm said. Initial jobless claims also declined by 1,000 to 197,000 in the week ended September 26, according to the US Labor Department. The figures suggest that employers remain reluctant to let workers go, even though hiring has not returned to the pace seen in the years immediately after the pandemic.

The Labor Department's Job Openings and Labor Turnover Survey showed that the rate of worker separations, which includes layoffs and resignations, was unchanged from the previous month, while hiring increased by 3.3%. 28bn acquisition deal Economists have described the labour market as stable, although concerns remain about wage growth and inflation. PNC Economics analysts said in a September 30 research note that the labour market was showing signs of stabilisation and possible reacceleration.

They also warned that renewed wage growth could make it harder for the Federal Reserve to bring inflation down without further interest rate increases. The September data presents a more encouraging picture than the first-half figures, but the rise in AI-related layoffs and the cautious pace of hiring suggest that the labour market remains uneven. The coming months could show whether employers increase recruitment or continue to prioritise automation, restructuring and cost control.