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As companies continue to announce layoffs in a resilient economy, experts believe there’s a hidden factor at play: artificial intelligence.
While firms often frame job cuts as “optimization” or “restructuring,” insiders suggest these terms are increasingly being used to mask large-scale AI-driven displacement.
Some companies, like IBM, have openly acknowledged the shift. In May, the company’s CEO told The Wall Street Journal that it laid off 200 HR employees and replaced them with AI chatbots, even as its total workforce grew in other areas.
Another standout is Klarna.
CEO Sebastian Siemiatkowski told CNBC’s Power Lunch, “The truth is, the company has shrunk from about 5,000 to now almost 3,000 employees. If you go to LinkedIn and look at the jobs, you’ll see how we’re shrinking.”
But these are exceptions. Most firms avoid linking AI directly to layoffs. Christine Inge, a professional development instructor at Harvard, explained:
“What we’re likely seeing is AI-driven workforce reshaping, without the public acknowledgment. Very few organizations are willing to say, ‘We’re replacing people with AI,’ even when that’s effectively what’s happening.”
Companies are choosing words like “efficiency” or “reorganization” for a reason. According to Jason Leverant, COO of AtWork Group, “Many companies are relying on these euphemisms as a shield. Companies laying off as they embrace large-scale AI adoption is much too coincidental to ignore.”
Candice Scarborough, director at Parsons Corporation, adds:
“They align suspiciously well with the rollout of large AI systems. That suggests that jobs are being eliminated after AI tools are introduced, not before.”
She elaborates on the language used:
“Restructuring sounds proactive; business optimization sounds strategic; and a focus on cost structures feels impartial. But the result is often the same: displacement by software. Sandbagging these cuts under bland language helps companies avoid ‘AI backlash’ while still moving ahead with automation.”
Who’s Being Affected Most?
The layoffs aren’t random. They’re concentrated in departments where generative and agentic AI perform best, content creation, customer support, HR, and operations.
“This silence is strategic,” said Inge. “Being explicit about AI displacement invites blowback from employees, the public, and even regulators. Staying vague helps preserve morale and manage optics during the transition behind the scenes.”
Taylor Goucher, VP at Connext Global, emphasized that companies often overestimate AI’s capacity. “AI might automate 70%–90% of a process, but the last mile still needs the human touch, especially for QA, judgment calls, and edge cases.”
Even when companies realize the tech falls short, they don’t revert to U.S.-based hiring. Instead, “When the AI doesn’t work out, they quietly outsource or rehire globally to bridge the gap,” Goucher said.
While full-time staff are often shielded from AI-related explanations, freelancers, especially 1099 contractors, were among the first to hear the truth.
“Often, they are being told they are being replaced with an AI tool,” said Inge.
She pointed to freelance roles in copywriting, graphic design, and video editing as the earliest affected.
But transparency can backfire. When Duolingo CEO Luis von Ahn suggested phasing out contractors in favor of AI, the backlash was swift, forcing the company to walk back some of its statements.
Inge noted, “After the huge backlash that Duolingo faced, companies are afraid to say that is what they are doing. People are going to get angry that AI is replacing jobs.”
Despite job cuts, the overall U.S. job market remains stable, with unemployment at 4.1% in June 2025, according to Trading Economics. However, long-term forecasts point toward significant disruption.
The World Economic Forum’s 2025 Future of Jobs Report estimates that 41% of employers worldwide intend to reduce staff over the next five years due to AI. Even more alarmingly, Anthropic CEO Dario Amodei has predicted that generative AI like Claude could eliminate up to half of all entry-level office jobs.
No Full Replacement, Yet
Some experts caution against assuming AI is ready to take over entirely.
Mike Sinoway, CEO of LucidWorks, said, “Higher-ups are panicking because their AI efforts aren’t panning out.”
His research suggests the technology isn’t quite replacing humans at scale, yet.
Inge echoes this sentiment:
“AI can do a lot of things 90%. AI writes better ad copy, but human judgment is still required. That 10% where human judgment is needed, we are not going to see that replaced in the near term. Some companies are getting rid of 100% of it, but it will come back to bite them.”
Experts agree that transparency will eventually increase, but by then, the damage may be done.
“By then it won’t matter,” Inge said. “Job losses will be extremely large; the only thing we can do as individuals is adapt.”
