AI job cuts hit entry level as data centers add blue collar work

The U.S. economy shed 23,000 jobs in July, the Bureau of Labor Statistics said Aug. 7. That is far below what analysts expected. It was the first time since February that payrolls fell. The unemployment rate ticked down to 4.1%, but the labor force participation rate dropped to 61.4%, the lowest reading since February 2021.

"With job opportunities remaining scarce, more workers are exiting the labor market entirely," ZipRecruiter labor economist Nicole Bachaud said in a note to USA TODAY.

July marked the first time in 2026 the unemployment rate fell to 4.1%. It had held steady at 4.3% for three months, then dropped to 4.2% in June. Some experts attributed that dip to a decline in the number of people looking for work, rather than a significant rise in those getting hired. Average hourly earnings for private, nonfarm payrolls rose 2 cents to $37.62. Over the past 12 months they increased 3.2%, falling short of the 3.5% year-over-year increase in consumer prices recorded in June.

The "low-hire, low-fire" dynamic economists said defined the U.S. labor market in 2025 may be back, if it ever went away, USA TODAY reported. Labor Department data released Aug. 4 showed the quits rate, layoffs and job openings were little changed in June from the month before.

Health care was the only industry to post notable gains in July, adding 22,000 roles. That is still below the sector's average monthly gain of 36,000 over the past 12 months. Local government education fell by 50,000, retail trade shed 19,000 jobs and financial activities lost 14,000. Employment was little changed in social assistance, construction, manufacturing, professional and business services, and leisure and hospitality.

"Outside of health care, hiring has very little momentum," Kory Kantenga, LinkedIn's head of economics for the Americas, told USA TODAY. "This is not a labor market that's reaccelerating despite speculation to the contrary earlier this year."

Glassdoor's Employee Confidence Index fell to a record low in July. The share of employees who reported "a positive six-month business outlook" sank to 43.5%. Daniel Zhao, Glassdoor's chief economist, said the survey question asks about business outlooks, but employees weigh several factors when they answer. In a sluggish labor market, even employed workers can worry about their ability to land their next gig, promotion or raise.

"Clearly, employees don't feel like the current job market is working for them," Zhao said. He added that just because someone is already employed, "that doesn't mean that they are getting career opportunities they want."

U.S.-based employers announced 33,429 job cuts in July, down 27% from June and the lowest monthly total in two years, according to Challenger, Gray & Christmas. Announced layoff plans are down 41% this year compared with the first seven months of 2025. For the fifth straight month, artificial intelligence led all reasons companies cited for job cuts, with most in the technology and transportation sectors.

Employers announced plans to hire 16,095 people in July, up 47% from June and the highest total since 2022. So far this year, hiring plans are up 25% compared with the same period in 2025.

"Employers are hiring more than they were at this point last year, which bucks the trend we've seen since 2020," Andy Challenger, the firm's workplace expert and chief revenue officer, said in a statement. "The demand is showing up in aerospace, energy, and manufacturing, work that happens on a floor rather than a screen."

The ADP National Employment Report released Aug. 5 tells a different story. It suggests private U.S. employers added 44,000 jobs in July, driven by 36,000 roles added in education and health services. ADP found hiring increased in financial activities, professional and business services, information, construction and manufacturing, and declined in leisure and hospitality, trade, transportation and utilities, and natural resources and mining.

For recent graduates, the picture is worse. According to the Federal Reserve Bank of New York, college graduates aged 22 to 27 had an unemployment rate of 5.7% as of June 2026, a full percentage point higher than two years earlier for their cohort. The unemployment rate for all young workers was 7.2%. The underemployment rate, college graduates working in jobs that do not require a bachelor's degree, reached 42% for graduates of recent years, compared to 33.7% for all college graduates.

Employers are using AI to screen applications. Sixty-six percent of recruiters said at the beginning of 2026 that they planned to increase their use of AI for pre-screening interviews, according to LinkedIn research, while 81% of job seekers said they had used or planned to use AI in their job search.

The National Association of Colleges and Employers found AI skills cited in 16.5% of job descriptions in the spring, up from 10.5% last fall. Overall, 28% of employers say they are seeking early career talent who can use AI. In NACE's 2026 Student Survey, close to one-third of graduating seniors said AI skills would be "of little or no importance to their future career," and over half said they were not building AI skills and were not using AI in their job search.

"Employers are increasingly asking graduates to be ready for AI, while a significant portion of students are asking whether AI deserves a place in their work at all," NACE president and CEO Shawn VanDerziel stated in the research release.

The New York Fed found an overall slowdown in hiring in recent years, but not specifically concentrated in entry-level jobs with higher AI exposure. Based on its study of job postings, the bank wrote that "while AI may be contributing to recent labor market developments, it is not the main driver of the slowdown in hiring." Its employer surveys found that firms "mostly intend to incorporate AI mainly via retraining, with limited effects on hiring."

Handshake, an early-career platform, says graduating seniors in 2026 mentioned AI skills on their resumes at twice the rate of the class of 2022, with 74% of those mentions tied to real-world projects rather than coursework.

Meanwhile, the AI buildout is creating blue-collar work. Nicole Bachaud, labor economist at ZipRecruiter, said the mean minimum salary for data center jobs spiked 125.1% year-over-year to nearly $208,000. Postings for welders and pipefitters are up 164% year over year. Maria Flynn, president and CEO of Jobs for the Future, said an apprentice level technician can take home $40,000 to $60,000, with experienced electricians commanding north of $100,000.

That demand faces a political ceiling. Seventy percent of Americans oppose a data center being built in their local area, according to Gallup, and a New York Times/Siena poll conducted in September found roughly two-thirds opposed regardless of party. According to Data Center Watch, at least 75 data center projects worth roughly $130 billion have already been blocked or delayed this year.

In Turkey, a similar squeeze is hitting game development. More than 800 studios made the country a mobile gaming hotspot, but Rest of World reported that one developer went from a large studio to founding his own shop, and with Claude Code in hand realized he needed just two employees to achieve similar productivity. Entry-level jobs are disappearing at smaller studios, and larger studios are reluctant to hire inexperienced developers.

A university director in Turkey is warning students not to follow the traditional path of getting hired in an introductory position and working their way up, according to Windows Central, which cited the Rest of World report. Instead, they should build their own games while in school.