AI layoffs increasingly appear to be a corporate narrative concealing a more troubling truth, according to Oxford Economics

AI and Job Loss: Separating Fact from Fiction

Although sensational headlines often predict that artificial intelligence will soon dominate the workforce and trigger widespread unemployment, recent findings from Oxford Economics challenge this assumption. Their research indicates that companies are not replacing large numbers of employees with AI. Instead, the data suggests that some organizations may be using AI as a convenient explanation for routine staff reductions.

In a report released on January 7, Oxford Economics pointed out that while there are individual cases of jobs being lost to automation, there is no substantial evidence in the broader economic data to support the idea of a major shift in employment due to AI. The report goes further, proposing that some businesses may be framing layoffs as a positive move toward innovation, rather than admitting to issues like over-hiring or declining demand.

Reframing Layoffs for Investors

This strategy appears to be aimed at reassuring investors. By attributing job cuts to the adoption of advanced technology, companies can present themselves as forward-thinking and adaptable, rather than as businesses facing traditional setbacks. The report notes that this narrative is often more appealing to shareholders than acknowledging operational missteps.

Wharton professor Peter Cappelli explained in an interview with Fortune that companies have been known to announce so-called “phantom layoffs”—job cuts that never actually happen—to boost their stock prices. However, he noted that investors eventually caught on, and the market stopped reacting positively when it became clear that these layoffs were not being carried out.

When asked about the connection between AI and workforce reductions, Cappelli advised a closer look at company statements. He observed that while headlines may blame AI, the actual announcements often only express hope that AI will eventually take over certain tasks, rather than confirming that such changes have already occurred. Companies, he suggested, are telling investors what they believe they want to hear.

Examining the Numbers

To highlight the gap between perception and reality, the Oxford Economics report referenced data from Challenger, Gray & Christmas, a leading layoff tracking firm. In the first eleven months of 2025, AI was cited as the reason for nearly 55,000 job cuts in the United States—over 75% of all AI-related layoffs reported since 2023. However, this number accounts for just 4.5% of all reported job losses during that period.

By comparison, layoffs attributed to general “market and economic conditions” were four times higher, reaching 245,000. Considering that between 1.5 and 1.8 million Americans typically lose their jobs each month, the impact of AI on overall employment remains relatively minor.

Productivity and the AI Revolution

Oxford Economics offers a straightforward test for whether AI is truly replacing human workers on a large scale: if this were the case, productivity per worker should be rising rapidly. Yet, the data shows that productivity growth has actually slowed, reflecting normal economic cycles rather than a surge driven by automation. The report acknowledges that it often takes years for new technologies to deliver measurable productivity gains, and current evidence suggests that AI is still being tested rather than widely implemented as a substitute for employees.

Meanwhile, recent figures from the Bureau of Labor Statistics indicate that the labor market is shifting toward what KPMG chief economist Diane Swonk has described as a “jobless expansion,” where hiring and firing rates are both low. This observation aligns with comments from Savita Subramanian, Head of US Equity & Quantitative Strategy at Bank of America Research, who noted that companies have increasingly focused on improving processes rather than simply reducing headcount. She also pointed out that productivity has not seen significant improvement since 2001, echoing Nobel laureate Robert Solow’s famous remark that the benefits of the computer age are visible everywhere except in productivity statistics.

Entry-Level Jobs and Labor Market Trends

The report also addresses concerns that AI is eliminating entry-level white-collar positions. While the unemployment rate for recent college graduates in the U.S. peaked at 5.5% in March 2025, Oxford Economics attributes this more to an oversupply of degree holders than to automation. The proportion of Americans aged 22 to 27 with a university education reached 35% by 2019, with even higher rates in parts of Europe.

In summary, Oxford Economics concludes that changes in the job market are likely to be gradual and incremental, rather than sudden and disruptive.