Businesses aren’t laying off staff because of AI, they’re using it as an excuse to distract from ‘weak demand or excessive hiring’
Companies aren’t laying off workers because of AI, instead, job losses are down to “more traditional drivers” with the technology essentially used as a cover.
That’s according to a study by Oxford Economics that claims evidence of an AI-driven shake-up of jobs is “patchy”, casting doubt on claims that AI will spark an increase in unemployment.
“Early claims of AI’s current impact on the job market are exaggerated,” the study noted.
Over the last couple of years, major companies have slashed jobs and pinned the blame loosely on AI, calling it “restructuring” to focus on “key strategic” or “high-growth” areas of the business.
Ben May, director of global macro research at Oxford Economics noted that there is some “anecdotal evidence” that jobs are being lost in sectors “vulnerable to AI and automation”.
Broadly speaking, however, the concerns over mass AI-related job losses appear overblown.
“Overall, though, firms don’t appear to be replacing workers with AI on a significant scale and we doubt that unemployment rates will be pushed up heavily by AI over the next few years.”
“While a rising number of firms are pinning job losses on AI, other more traditional drivers of job layoffs are far more commonly cited,” the report states. “What’s more, we suspect some firms are trying to dress up layoffs as a good news story rather than bad news, such as past over-hiring.”
A third of UK tech leaders have said they cut staff for AI, but now regret such redundancies. Separate research has suggested that jobs lost to AI are being rehired — but often offshore or at lower rates of pay.
Are AI job losses real?
The report noted that 55,000 job losses were pinned on AI in the first 11 months of 2025, but that made up just 4.5% of overall losses, with most attributed to economic conditions.
Indeed, Amazon pinned the blame for a 14,000 headcount reduction on slashing bureaucracy, while Atlassian has denied its customer service job cuts have anything to do with AI.
Oxford Economics thinks even that small figure blamed on AI may be overstated.
“Linking job losses to increased AI usage rather than other negative factors like weak demand or excessive hiring in the past conveys a more positive message to investors,” the report said.
While Oxford Economics notes that employment disruption is happening due to AI, it’s not because AI is replacing workers, but to fund experiments in AI.
“Sectors where there are potentially the most easy wins from AI adoption have a greater incentive to put the new technology to the test,” the report said.
“To finance this, budgets for other parts of the business, including wages, may have to be cut. While there may be causal link between greater AI spending and reduced headcounts in some sectors, this doesn’t necessarily mean AI has replaced workers.”
Where’s the productivity boost?
If AI is replacing workers, there should be a clear productivity boost, Oxford Economics noted. Instead, much of enterprise AI adoption continues to be experimental at best.
“Productivity growth rates in other major advanced economies have also been largely unexceptional,” the report noted. “This supports our view that, for now, greater AI use is more experimental in nature and isn’t yet replacing workers on a major scale.”
The report noted that AI adoption rates have already begun to fall off among big companies, and predicted that any AI-related shifts are likely to be “evolutionary rather than revolutionary.”
Some industries and organizations may see disruption in their slice of the economy, for example, but the “macro-level impact is much more limited.”
Graduate jobs
Graduate jobs and early-career roles have been cited as the hardest hit by AI so far. One survey by IDC suggested that two-thirds of companies had slowed entry-level hiring, with nine-in-ten saying roles were changing or disappearing because of AI.
Oxford Economics noted that in the three years since the public launch of OpenAI’s ChatGPT, the graduate unemployment rate in the US has grown from 3.9% to 5.5% in March 2025.
“This, along with the sectoral breakdown, which shows the biggest unemployment increases in professional and technical services, is widely cited as evidence that firms might be reducing graduate hires and turning to AI for tasks traditionally handled by junior workers,” the report notes.
That’s no surprise given big-name companies such as PwC have said they are cutting graduate roles. But the report points out that the rise in unemployment “doesn’t seem particularly extreme” and the sectoral impact “isn’t out of line” with other graduate roles.
The study added that the widening gap between professional and technical services and other roles predates the arrival of generative AI. Beyond that, historical data shows that graduate unemployment commonly rises more sharply than the wider unemployment rate.
“Against that backdrop, the recent rise in graduate unemployment doesn’t seem unusual,” the report noted. Simply put, the data points to “cyclical factors” making it harder for younger people to find jobs, rather than AI.
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