Thousands of workers are facing job losses at Amazon (AMZN), UPS (UPS), Nestlé (NSRGY) and other major companies, in an economy defined by uncertainty, AI and global tensions.
Amazon said Tuesday in a message to employees that it would reduce its “corporate workforce” by approximately 14,000 positions. The announcement raised the question: Was this a sign that workers were being replaced by an emerging technology that threatened to make them obsolete?
Amazon CEO Andy Jassy said the downsizing “wasn’t really driven by finances, or even artificial intelligence – not yet, at least.”
“It’s a cultural thing,” Jassy said. “If you grow as fast as we have for several years – in terms of the size of the companies, the number of people, the locations, the types of companies you work in – you end up with a lot more people than before, and you end up with a lot more layers.”
The workers would not be blamed for having whiplash, however. The job market was strong just a few years ago, with opportunities reach a record level in 2022 amid a wave of resignations. Job openings in technology and math in particular peaked early that year, at more than double their February 2020 level, according to Indeed the research, only to plunge 36% below that pre-pandemic level by July of this year.
Indeed noted that the earlier hiring boom, broader economic conditions and interest in AI could explain “the collapse in demand for tech workers” this year.
“If we take the case of Amazon, we know that they hired very aggressively between 2017 and 2022, adding tons of workers during the pandemic, so I’m not surprised that there was a correction there,” Timothy DeStefano, an economics professor at Georgetown University, told Yahoo Finance.
“Personally, I don’t think there’s any connection between these layoffs and AI,” DeStefano said.
Sure, companies are investing heavily in artificial intelligence, but there’s no evidence that they’re deploying it in a way that’s displacing thousands of workers.
The recent layoff announcements weren’t really unusual, DeStefano said.
Goldman Sachs on Thursday released a survey of more than 100 of its bankers on how their clients were using or planning to use AI, revealing that “only 11% of U.S. companies are actively reducing headcount using AI,” although deeper reductions could come later.
“These results confirm our long-held view that AI will primarily be a productivity and income-enhancing technology, while also confirming our recent research findings that AI’s impact on the labor market is still limited outside of a few specific sectors like technology,” Goldman Sachs Research economists said.
However, Amazon is not the only company to lay off employees. UPS said in its third-quarter results that it reduced its “operational workforce by approximately 34,000 positions” in the first nine months of the year as it appeared to be more efficient, while about 14,000 positions, primarily in management, were also eliminated.
Target (TGT) also plans to cut 1,800 positions within the company, while Paramount Skydance (PSKY) is expected to cut approximately 1,000 positions. According to the Los Angeles Times, another 1,000 Paramount employees are expected to be laid off later.
Even perceived winners in the AI-powered economy, like Meta (META), recently announced layoffs – in its AI unit, no less. Rivian (RIVN) has also reportedly implemented workforce reductions.
Even though layoffs remain relatively stable and the labor market showed possible signs of a slight recovery in October, this year’s no-hire, no-fire employment climate has further rattled younger workers, and the share of long-term unemployed is at its highest level in more than three years. That the number of unemployed Americans submitting applications is about to expand will certainly be bad news.
“I think layoffs are a bad thing, and they’re particularly bad for the people involved,” Matthew Bidwell, a management professor at the University of Pennsylvania’s Wharton School, told Yahoo Finance. “But they are also part of the capitalist process of creative destruction: corporations will invest in creating businesses in certain areas, and over time these businesses will prove to no longer work or become obsolete.”
Learn more: How a CD can help you prepare for and survive layoff
Some companies, however, have been transparent about some realities workers fear: Chegg (CHGG), an education technology company, said this week that it would cut about 45% of its workforce as AI cuts into revenue, and the CEO of Salesforce (CRM) said that AI efficiencies meant the company now needed fewer staff.
But, more broadly, “I think there are early signs that AI might start to affect the job market — it’s not clear to me that these layoffs are where we’re seeing them so far,” Bidwell said.
Emma Ockerman is a reporter covering economics and labor for Yahoo Finance. You can reach her at [email protected].
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