AI is replacing workers faster than ever in 2026. Here's which industry is taking the biggest hit - Moneycontrol.com
AI-driven layoffs in the US have already exceeded the combined total of 2024 and 2025, with the technology sector accounting for the largest share of
AI-driven layoffs in the US have already exceeded the combined total of 2024 and 2025, with the technology sector accounting for the largest share of job cuts, according to a new Challenger report. AI layoffs are surging in 2026. Which workers are feeling the impact first? Artificial intelligence has emerged as the leading reason cited for job cuts in the United States this year, with AI-related layoffs in the first five months of 2026 already surpassing the combined total recorded in 2024 and 2025, according to data from outplacement firm Challenger, Gray & Christmas. The report shows that US employers announced just over 97,000 job cuts in May 2026, marking the highest May total since the onset of the Covid-19 pandemic in 2020. Layoffs have increased for three consecutive months, rising from 48,307 in February to 60,620 in March, 83,387 in April and more than 97,000 in May. AI emerges as top reason for layoffs According to Challenger, AI was cited as the primary reason for nearly 40% of all announced job cuts in May, up sharply from 7% in January.
The share rose steadily through the year, reaching 10% in February, 25% in March and 26% in April. In May alone, 38,579 job cuts were attributed to automation, the highest level recorded since the firm began tracking AI-related layoffs in 2023. The figure brings the total number of AI-linked job cuts in 2026 to 87,714, exceeding the combined total of 54,836 in 2025 and 12,742 in 2024. “AI is now the leading reason companies give for cutting jobs,” Andy Challenger, chief revenue officer of Challenger, Gray & Christmas, said in the report. Technology sector records highest layoffs The technology industry accounted for the largest share of workforce reductions. US-based technology companies announced 38,242 job cuts in May, the highest monthly total since August 2024. On a year-to-date basis, job cuts in the tech sector have climbed 66% to 1.23 lakh, making it the hardest-hit industry and recording three times more layoffs than the next closest sector, according to the Challenger report. Experts urge caution on AI impact Despite the increase in AI-related layoff announcements, some economists and researchers cautioned against assuming automation is solely responsible for the reductions.
Daniel Keum, associate professor of management at Columbia Business School, said the broader labour market remains resilient. US payrolls increased by 172,000 in May, while employment figures for March and April were revised upward, according to data from the Bureau of Labor Statistics. Keum said AI's impact remains concentrated in specific industries, particularly technology, rather than across the wider economy. Daniel Zhao, chief economist at Glassdoor, questioned whether all companies citing AI as a reason for layoffs are actually replacing workers with automation. “A company can say [AI] is why we’re doing layoffs, but that doesn’t necessarily mean that’s actually why those layoffs are happening,” he said. Fabian Stephany, assistant professor of AI and work at the Oxford Internet Institute, also expressed skepticism about some AI-related layoff claims. “I’m really skeptical whether the layoffs that we see currently are really due to true efficiency gains. It’s rather really a projection into AI in the sense of ‘We can use AI to make good excuses,’” he said. Hiring remains subdued despite labour market growth While overall employment growth remains positive, hiring activity continues to lag.
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