Companies claiming that employee layoffs are due to AI adoption are using it as an excuse to mask their business failures, such as over-hiring and weak customer demand.
A new research brief from Oxford Economics cited by Fortune suggests that companies don’t appear to be replacing workers with AI on a significant scale.
Despite existing anecdotal evidence, the macroeconomic data don’t support the notion that automation causes structural shifts in employment.
Instead, authors suspect that companies are using AI to frame layoffs as good news rather than bad news in the eyes of investors. This helps to mask traditional business failures, like over-hiring in the past or weak consumer demand.
The report cites data from the recruiting firm Challenger, Gray & Christmas, highlighting the disparity between the perception and reality of AI layoffs.
For example, AI was cited as the reason for nearly 55,000 job cuts in the US in the first 11 months of 2025, accounting for more than three-quarters of all AI-related cuts reported since 2023. However, the figure represents only 4.5% of the total reported job losses.
In contrast, “market and economic conditions” were the reason behind 245,000 layoffs, which is four times the number of job losses due to AI.
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The brief concludes that “AI-related job losses are still relatively limited” in the US labor market, where over 1.5 million workers lose their jobs in any given month.
The broader impact of AI adoption on the job market is yet to be understood. A recent study by the Massachusetts Institute of Technology (MIT) researchers suggests that AI can already replace 11.7% of the US workforce.
At the same time, as many as 95% of organizations are getting zero return on their billions of dollars’ worth of investments in generative AI, suggesting the hype over automation may be overblown.
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