Is AI disrupting the labour market?
The US labour market still reflects a “low-hire, low-fire” pattern, but rising layoff announcements and the growing role of artificial intelligence are testing its stability. The key question is whether AI is beginning to drive a more structural shift in employment.
Market analyst
Market backdrop and upcoming data
Major US equity indices, including the S&P 500 and Nasdaq 100, are testing key support levels ahead of several important labour market releases. These include the ADP payroll report, and the Challenger layoffs report mid-week, followed by official non-farm payroll (NFP) data from the US Bureau of Labor Statistics (BLS) at the end of the week.
Each data set measures different aspects of employment conditions, and markets tend to react differently depending on the perceived reliability and implications of the figures.
ADP data and the “low-hire, low-fire” environment
ADP payroll data, derived from payroll processing covering around 26 million employees or roughly 20% of the US private sector, has become a closely watched indicator. Over the past 12 months, ADP has shown average monthly job creation of approximately 35,000 roles. That pace reflects a “low-hire, low-fire” environment in which companies are cautious about adding staff but are equally reluctant to implement large-scale redundancies.
Consensus expectations for the next ADP release point to job growth of around 50,000, suggesting continued moderation rather than a sharp slowdown.
Challenger layoffs and the AI factor
The Challenger report tracks announced layoffs based on corporate disclosures. Over the past year, it has recorded more than 100,000 planned job cuts in five separate months, with some readings among the highest since the global financial crisis.
The most recent report showed 118,000 announced layoffs in January, while November saw around 153,000.
Artificial intelligence is increasingly cited as a contributing factor in some workforce reductions, although it remains a minority driver overall. In January 2026, AI was directly referenced in approximately 7,624 layoffs, representing about 7% of the total. While this indicates that AI is influencing restructuring decisions in certain sectors, its aggregate impact on employment remains limited for now.
Markets have responded pragmatically to some of these announcements. In certain cases, such as a recent decision by Block to cut around 4,000 roles, share prices rose following the news, reflecting investor focus on cost control and efficiency.
BLS payrolls and data revisions
The BLS non-farm payroll figures remain the most prominent labour market release, but their influence has moderated due to volatility and frequent revisions.
It is common for initial estimates to be revised in subsequent months. For example, the annual revision to 2025 employment data resulted in a downward adjustment of approximately 898,000 jobs, underlining the need to interpret headline figures with caution.
Overall, while AI is beginning to appear in redundancy data, current evidence suggests it is not yet driving a structural shift away from the prevailing low-hire, low-fire labour market dynamic.
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