The Era of AI Layoffs Has Begun

0:05Lately, it seems like the word layoffs has been all over the news. Got breaking news this morning. Massive job cuts at Amazon. Overnight, the company announcing it'll eliminate approximately 14 ,000 roles. Verizon is cutting at least 15 ,000 jobs. Target is preparing to cut 1 ,800 corporate jobs. Name the company and name a big brand that you maybe interact with, and chances are they probably have let some people go. That's our colleague Chip Cutter. It's Amazon. It's Verizon. its target. We have seen layoffs recently from Microsoft, Meta, Google, Salesforce, Intel. Just these big, big companies.

0:48And you have so many other major employers across the U.S. just thinking differently about how they're going to hire, how they're going to get work done, how many people they need. The layoffs primarily target white-collar workers. The job cuts at Paramount will be in areas like finance, legal, technology, and marketing. These were corporate jobs. These were white-collar jobs. They were jobs in areas like HR, in marketing. They were people who made good money, made a good salary. And there's a theme running through a lot of these layoffs. Advancements in artificial intelligence. Companies are just really starting to kind of understand how artificial intelligence could be used inside of organizations.

1:34Right now, the fear is that there is this smoke, and their question is, how big could this fire go? How big could it spread? Is this going to be a jobs apocalypse, or are there going to be new roles created, and are people going to be okay? And there's a big debate on both sides of that. Is the beginning of the AI Armageddon movie actually just everybody losing their jobs? That's right. That is the big question.

1:57Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Thursday, November 20th.

2:10Coming up on the show, has the era of AI layoffs officially begun?

2:30From the perspective of corporate America, can you just walk me through the last five years in the labor market? It's been a weird five years. So we go back five years. We have COVID, of course, the pandemic. This is the era of the Zoom layoff, where companies start letting people go as their business contracts because of COVID. Then, cut to 2021, things start to look better. People reemerge. Companies start hiring again. We get the period known as the Great Resignation, where lots of people end up leaving their jobs because there's just so much opportunity. Companies are hiring again. There's a lot of movement.

3:09And there was like a worker shortage. A worker shortage. Companies were offering signing bonuses. They were just really trying to, they would do this thing called labor hoarding where they would just hire people even if they didn't have roles for them. A lot of the big tech companies did this. And so it was this era that like, we don't even know what we're going to need you to do, but we just want to hire smart people and we'll figure it out.

3:31Now it's almost the opposite that we are now in this moment where companies talk about, you know, their ability to constrain headcount as a real win. And it's this idea that big companies, big headcounts are almost an impediment to growth. CEOs see what some startups are able to do with only a handful of employees. Some of these startups that have billion-dollar valuations and very small staffs. And the leaders of big corporations across America really look at that with envy and think, why can't my company do that with a lot smaller workforce? And companies are now touting their ability to stay lean.

4:08They're trying to signal to investors in Wall Street that they're being careful about spending. They're watching their costs. Wells Fargo CEO earlier this year boasted to investors that they had been able to sort of cut the company's headcount for 20 consecutive quarters. Bank of America CEO told investors, he reminded them sort of how big the company was when he started and how headcount had shrunk. It's almost this idea that we want to brag about sort of all that we're doing to keep headcount low. The overall economic picture is murky. Data released today from the Bureau of Labor Statistics showed the economy added 119 ,000 jobs in September, but the unemployment rate ticked up slightly to 4.4%.

4:52One thing that always seems to accompany these big layoffs is lofty talk about how the workplace is being transformed by AI. Microsoft eliminated over 15 ,000 this year while investing about$80 billion in AI. Amazon executives say they're all in on AI, confident they can continue to grow with fewer people. A Google executive wrote, if you don't feel aligned, this is your exit path. I was really struck by what the now outgoing CEO of Walmart said about this last month. I was in an auditorium at the company's brand new headquarters in Bentonville, Arkansas, and Doug McMillan, Walmart's CEO, got on stage and said he thought AI was going to change literally every job.

5:36And this really kind of struck me because here is the country's largest private employer saying that AI is going to reshape work fundamentally. And the company also said that it did not plan on increasing its headcount over the next three years. It wanted to keep headcount flat. And this is America's largest employer, right? Walmart saying that they're going to keep their headcount flat over three years? Pretty big deal. Like that is significant. Roles are going to change. Some roles will go away, others will be added. Headcount will stay flat. Walmart doesn't intend for its business to stay flat.

6:10It certainly wants to grow its sales and wants to increase its profits. So, but it thinks it can do that while keeping its headcount the same at what it is right now. And I think that's really notable. So how is AI actually being used in the workplace? And how is this wave of layoffs affecting the economy? That's next.

6:42Lately, CEOs are talking a lot about how AI is going to change the workforce. For instance, the CEO of the clothing resale company ThredUp recently said, quote, I think it's going to destroy way more jobs than the average person thinks. CEOs started putting out these internal memos, too, of just making it clear that AI is going to destroy jobs. And they're not all in agreement on this, but a fair number of leaders are really acknowledging this could be pretty destructive. There are a fair amount of good-paying, solid white-collar jobs that could go away because of this technology. So what are companies saying about how exactly AI is being used to replace workers?

7:24The idea that we can use AI, we can use these software agents, these technological systems that can help do work without humans, that do work faster, and to kind of really sort of usher in a new era of productivity. So companies are now rolling out AI into more departments, and they're starting to see the results. So whether that is in areas like marketing or legal or human resources or in their call centers. I mean, I hate to sound like a little bit naive here, but I feel like a lot of times that I've seen examples of AI being used or tried to use it myself that I'm actually like, it has this sort of veneer of intelligence.

8:05But actually when you try to actually go and use the thing, it's actually kind of dumb still. It's kind of dumb. It's sort of giving you what it thinks should be a good result, what it seems from the surface to be good. I think the tech optimist would say, like, these tools are improving so fast. Give it time. It's going to get better and better. Even if it takes sort of a human to be that final set of eyes that makes something better to revise it, you're still working faster than you were before. You're still able to do more than you could. So let's go back to Walmart now for a minute. What is Walmart saying that it's using AI for?

8:47Walmart is interesting because Doug McMillan said, you know, maybe there's a job in the world that AI won't change, but I haven't thought of it. And the company is already starting to change how it uses AI internally. So, you know, it in recent years has automated many of its warehouses with the help of AI. That has triggered some job cuts. It is looking to automate some back-of-store tasks. And it's also established some new jobs. So it created an agent builder position this year, and that's an employee who builds AI tools to help merchants. And so, you know, it's saying that it expects to add people in some areas.

9:23So it'll add people in sort of high-touch customer positions like its bakeries and its stores or home delivery. But it also then wants to use AI and technology to eliminate some roles, to make it more efficient. It actually just also hired an executive to help oversee all of this. So it hired an executive from Instacart who reports directly to the CEO. And part of his role includes determining how Walmart's workforce should shift. Does Walmart anticipate having like robot greeters instead of a classic, you know, friendly seniors that are usually in front of the stores? So Walmart was asked about this.

10:00Like, should you expect these humanoid robots in the stores? And the leaders pushed back pretty hard on this. And they said, no, like we expect to serve people with people. Like, that people will probably be creeped out if there's suddenly sort of a robot greeter at the front of the store. Another job AI is still not doing is actually laying people off. Humans are still fumbling their way through it with all their awkwardness. There's sort of this desire to lay people off in the most efficient way possible, and that is leading to some new tactics. So when Amazon began cutting its 14 ,000 employees recently, it actually sent many of them a text, some of whom received this in the middle of the night that said, check your inboxes.

10:41And then there, when people looked at their inboxes, they got a note saying, you know, essentially an update on your role at Amazon and making it clear your role was being eliminated. Ouch. That sounds like a pretty terrible push notification. Pretty awful. Something you don't want to see in your phone. What companies want to avoid is sort of the communal emoting. This idea of people coming out of conference rooms after they're being told they're losing their jobs and then, you know, hugging their colleagues. Everybody's crying. They're embracing each other. There's a whole scene. Companies don't want that anymore.

11:17Companies want to avoid scenes like what happened earlier this month at Condé Nast. After a number of employees were laid off, a group of workers approached the company's head of HR at his office door, demanding to talk. You don't want to answer any questions? I've directed you back to your workplace. Is that a good answer, guys? Absolutely not. Come on, Stan. That's not a really good answer, Stan. This is leading to companies increasingly doing layoffs at home. Target shut down its corporate office in the U.S. for the week that it did layoffs in October. Southwest largely did the same when it did its layoffs earlier this year.

11:54The idea is, like, everybody's going to get the message at once. It's not going to be a one-on-one conversation with your manager necessarily. You're just going to all find out.

12:04What's your sense of where we are in the layoff wave? Is it almost over or just beginning? We're just at the beginning of this. I mean, if AI is just being rolled out inside lots of companies, we don't quite know then just how deep companies could cut or where they could decide that they can shrink even more. That's what's adding to the sense of paranoia inside so many organizations where you just have colleagues going up to their peers being like, do you think we're next? Do you think we're safe? That's the conversation among workers right now. Like, how safe should I feel in my job right now?

12:36I'm in this white-collar job that seemed pretty secure a few years ago. Is it now? It's really hard to say. We've talked a lot about how companies are saying that they're trying to be more efficient or that they're ahead of the curve by adopting AI. But could another factor be that companies are actually worried about the economy getting weaker and so they're cutting costs to prepare for a downturn? I think that is a big part of this. Even if CEOs don't always admit it, they're talking about this. the preparing for things to get a little bit worse. I was talking with one CEO who really follows the job market.

13:09And he described this as a mood-based downsizing, where CEOs are talking to other CEOs and realizing, well, one company is cutting, preparing for perhaps a worsening economy, or they just want to cut costs. So then other CEOs are going to do the same. It's this idea that, you know, you tell me why we can't cut CEOs going to their teams being like, come on, There's plenty of people here who maybe don't need to be here, find some ways to let people go. What is it that's making CEOs nervous about the economy? I think CEOs see consumers starting to pull back a little bit. Inflation is still a reality.

13:44Consumers feel stretched. We now have unemployment ticking up that's making things harder. I think there's a real concern that as we sort of go into year two of the Trump administration, that perhaps there still are going to be disruptions that could affect the economy.

14:01How does this layoff surge fit into the bigger economic picture? I mean, obviously, it can't be good. This could have real problems for the economy. Think about sort of consumer spending, how important that is to the economy. Think about sort of the role that work plays, you know, in our identities, in our lives, and sort of just people's ability to just live their lives and pay their rent and travel and do all the things that consumers do. So it's really going to be an issue if there are sort of bigger white-collar job cuts. Despite all the AI talk, Chip says there's still a long way to go before AI fully takes over the office, if it ever does.

14:41There's not a consensus of sort of what AI ultimately does. We've seen past tech revolutions where plenty of new jobs have been created. They're not always easy to predict now, but they end up being created later on. And so some would say we might still be okay in all this, but it's unclear. And I think right now it just seems really worrying because we are in this mode where companies realize there's a lot more to cut. That these companies can get smaller, many executives would argue, and they'll still be okay. And that can still have a vast human toll.

15:25That's all for today. Thursday, November 20th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by Sarah Nassauer, Ray Smith, and Haley Zimmerman. Thanks for listening. See you tomorrow.