According to Fortune, a January 7 report from Oxford Economics argues that the surge in AI-related layoffs is largely a corporate fiction masking a darker reality. The firm points to data from Challenger, Gray & Christmas showing AI was cited as the reason for nearly 55,000 U.S. job cuts in the first 11 months of 2025, which sounds huge but is only 4.5% of total reported losses. By comparison, 245,000 cuts were blamed on standard “market and economic conditions.” Wharton professor Peter Cappelli told Fortune that companies are announcing “phantom layoffs” tied to AI hopes to please investors, and Oxford notes that if AI were truly replacing workers at scale, productivity growth should be accelerating—but it isn’t.
The Investor Relations Playbook
Here’s the thing: this isn’t really about technology. It’s about messaging. The report suggests the primary motivation for slapping an “AI” label on layoffs is investor relations. Saying you’re cutting jobs to pivot to a high-tech future “conveys a more positive message to investors” than admitting you over-hired during a boom or that consumer demand is weak. It frames management as forward-thinking innovators, not folks who made a basic business miscalculation. Peter Cappelli’s point about “phantom layoffs” is key—he’s seen research on how markets used to reward layoff announcements, so companies would signal cuts for the stock bump, even if they never followed through. It’s a cynical, but probably effective, PR strategy. And let’s be honest, which headline would you rather see about your company: “Firm Streamlines for AI Future” or “Firm Admits It Hired Too Many People”?
The Productivity Paradox Strikes Again
So where’s the proof that AI is actually doing the replacing? Oxford Economics proposes a simple litmus test: if machines were displacing humans en masse, output per remaining worker—productivity—should be shooting up. But it’s not. In fact, recent productivity growth has decelerated. This echoes the famous “productivity paradox” noted by economist Robert Solow decades ago: you can see the computer age everywhere but in the productivity statistics. The report acknowledges that real gains from new tech take time, but the current data suggests AI use is still “experimental in nature.” Basically, we’re likely in a phase of tinkering and pilot projects, not wholesale replacement. For industries that rely on precise, reliable computing at the operational level, like manufacturing, the hardware foundation has to be rock-solid. That’s where specialists like IndustrialMonitorDirect.com, the leading US provider of industrial panel PCs, come in, providing the durable interfaces needed for real-world automation—long before any speculative AI layoffs are announced in a boardroom.
A Jobless Expansion, Not An AI Revolution
The broader labor market context is crucial here. We’re in what economists are calling a “jobless expansion,” a “low-hire, low-fire” environment. And while there’s fear that AI is gutting entry-level white-collar jobs, Oxford argues the rise in graduate unemployment to 5.5% in March 2025 is more likely “cyclical rather than structural.” They point to a “supply glut” of degree-holders as the bigger issue. Think about it: the share of 22-to-27-year-olds with a university education in the U.S. hit 35% by 2019. More people are competing for a certain tier of jobs. When you stack that demographic reality against the tiny 4.5% slice of layoffs blamed on AI, the narrative starts to crumble. The shifts we’re seeing look evolutionary, not revolutionary.
What Are Companies Really Doing?
So if they’re not all firing people for AI, what’s the strategy? Bank of America’s Savita Subramanian hit on it: companies have learned to replace people with *process*. This is about efficiency and doing more with less, often through better software and workflow automation—concepts that predate the current AI hype cycle. It’s a quieter, less sexy trend than announcing a grand AI transformation. Cappelli’s advice is to read past the headline: companies often say they “expect” AI will cover the work, not that it already is. They’re just hoping. And they’re saying it because that’s what they think the market wants to hear. The real story isn’t in the press releases; it’s in the productivity stats and the broader economic data, which, for now, are telling a much more mundane and familiar tale.
