AI and the labour market: the numbers behind a hiring squeeze

The July payroll number was a shock. The Bureau of Labor Statistics said on 7 August that US employers cut 23,000 jobs, well below analyst expectations. May and June were revised down to gains of 63,000 and 20,000 respectively, according to USA TODAY.

Unemployment fell to 4.1% from 4.2% in June. Participation fell to 61.4%. The jobless rate dropped because the workforce shrank, not because hiring picked up. ZipRecruiter labour economist Nicole Bachaud told USA TODAY that with opportunities scarce, "more workers are exiting the labor market entirely."

Average hourly earnings on private, nonfarm payrolls rose 2 cents to $37.62, up 3.2% over 12 months. That lags the 3.5% year-over-year rise in consumer prices recorded in June, so real pay is going backwards until the CPI report due 12 August settles the July figure. Health care was the only sector with notable gains, adding 22,000 roles, below its 12-month average of 36,000. Local government education lost 50,000, retail trade 19,000 and financial activities 14,000.

A low-hire, low-fire market

The ADP National Employment Report, released 5 August, told a different story. Private employers added 44,000 jobs in July, 36,000 of them in education and health services, with gains in financial activities, professional and business services, information, construction and manufacturing. Two payroll surveys, two directions. The BLS report is the one that sets the narrative, and its narrative is weak.

Labour Department data released 4 August showed the quits rate, layoffs and job openings little changed in June. That is the "low-hire, low-fire" pattern economists said defined 2025, and it appears to be back.

"It's not just that new grads are hitting the market. That happens every year," said Kory Kantenga, LinkedIn's head of economics for the Americas. "We haven't seen as many jobs available for each person looking. That's been declining since peak 2022."

LinkedIn data showed applications per job seeker rising in July. The mood among the employed is also poor. Glassdoor's Employee Confidence Index hit a record low in July, with the share of employees reporting a positive six-month business outlook falling to 43.5%. Glassdoor chief economist Daniel Zhao told USA TODAY that even employed workers worry about landing their next role, a promotion or a raise. "Clearly, employees don't feel like the current job market is working for them," he said.

There is a counter-current. Challenger, Gray & Christmas reported on 6 August that US employers announced 33,429 job cuts in July, down 27% from June and the lowest monthly total in two years. Announced layoff plans are down 41% year to date against the first seven months of 2025. Hiring plans rose to 16,095 for July, up 47% from June and the highest since 2022, and are up 25% this year. Andy Challenger, the firm's chief revenue officer, said in a statement that demand is showing up in aerospace, energy and manufacturing, "work that happens on a floor rather than a screen." Artificial intelligence nonetheless led all reasons companies cited for cuts for the fifth straight month, mostly in technology and transportation.

Where AI is hiring, and where it is not

The same technology is pulling in trades. CNBC reported on 26 September that welders, pipefitters, electricians and HVAC technicians are in demand for data centre buildouts. ZipRecruiter's Bachaud put the mean minimum salary for data centre jobs at nearly $208,000, up 125.1% year over year, though she attributed that to specialised engineering roles pulling the average up. Postings for welders and pipefitters are up 164% year over year.

Jobs for the Future president Maria Flynn said apprentice-level technicians can take home $40,000 to $60,000, with experienced electricians above $100,000. Research from Cushman & Wakefield cited by CNBC estimates every 100MW of new data centre development creates nearly 1,300 local jobs, about $110 million in annual wages and $344 million in gross output. Columbia College Chicago's Justin Sinkovich pointed to Louisiana, where Amazon committed $12 billion to a data centre with 540 on-site jobs, including 1,700 electricians, technicians and security personnel, and Meta's Hyperion project is worth $27 billion.

Public opinion is moving the other way. Gallup found 70% of Americans oppose a data centre in their local area; a New York Times/Siena poll this month found roughly two thirds opposed across parties. Data Center Watch counts at least 75 projects worth about $130 billion blocked or delayed this year, and Texas Governor Greg Abbott has issued a grid approval moratorium.

For graduates, the squeeze is sharper. CNBC reported on 25 September that the New York Fed puts unemployment for college graduates aged 22 to 27 at 5.7% as of June 2026, a full percentage point higher than two years earlier, against 7.2% for all young workers. Underemployment, graduates in jobs not requiring a bachelor's degree, has reached 42% for recent cohorts against 33.7% for all graduates.

AI sits on both sides of that. LinkedIn research cited by CNBC found 66% of recruiters planned to increase AI use in pre-screening interviews at the start of 2026, while 81% of job seekers had used or planned to use AI in their search. Handshake says 2026 graduating seniors mentioned AI skills on resumes at twice the rate of the class of 2022, and 74% of those mentions tied to real projects rather than coursework. NACE found AI skills required in 16.5% of job descriptions in spring, up from 10.5% last autumn, with 28% of employers seeking early-career hires who can use AI.

The New York Fed is careful about causation. In its study of job postings it wrote that "while AI may be contributing to recent labor market developments, it is not the main driver of the slowdown in hiring," and its employer surveys found firms "mostly intend to incorporate AI mainly via retraining, with limited effects on hiring."

The clearest damage so far is at the entry level in specific industries. Windows Central, citing a Rest of World report, described Turkey's mobile gaming scene, which grew to more than 800 studios at its peak, now failing to absorb juniors. One developer went from a large studio to founding his own and found that with Claude Code he needed two employees for similar output, while larger studios are reluctant to hire inexperienced developers. Xbox announced its largest ever downsizing in July, cutting 3,200 jobs across 2026 and 2027, and Double Fine Productions announced 23 layoffs after going independent.

Set against the payroll numbers, the picture is not a simple story of machines replacing people. Hiring has slowed, participation has fallen, pay is behind prices, and the front door for juniors is narrowing at the same time as AI tools spread through the screening process. The New York Fed's caution is worth holding on to: the evidence points to a weak market in which AI is one pressure among several, not the single cause.