Not only did payrolls grow by just 73,000 in July, below Wall Street estimates, but the revisions also showed that the spring had two consecutive months of growth below 20,000. The unemployment rate edged up to 4.2% from 4.1%, as the labor force shrank. Added to this sluggish cocktail is new data showing a remarkable surge in layoffs in July as well.
Employment consultancy Challenger, Gray & Christmas publishes a monthly “job cut” report and the July edition makes for some reading. According to the data, employers across the U.S. announced 62,075 job cuts last month—a 29% increase from June but a stunning 140% surge over July 2024 and a decisive end to the typical midsummer lull in workforce reductions. And nearly half of these cuts—49%—were related to artificial intelligence (AI) and “technological updates.”
The report says these cuts are “well above average for this month since the pandemic,” and one of the highest July pullbacks in the past decade, evidence that deep, technology-driven changes are rippling through the labor market. For perspective, the average number of job cuts announced in July from 2021 to 2024 was just 23,584. Even against the broader decade’s average of 60,398, this year’s total is notably higher.
Headlines, including in Fortune, have linked surging layoffs to increasing adoption of artificial intelligence (AI) in the enterprise, and Challenger Gray agrees, partially. A bigger impact is cutbacks in government employment as a result of the Department of Government Efficiency (DOGE), previously with Elon Musk in an ambiguous advisory role. A big part of the DOGE cuts, of course, is to encourage increasing AI adoption within the government. “We are seeing the Federal budget cuts implemented by DOGE impact non-profits and healthcare in addition to the government,” said Andrew Challenger, Senior Vice President and labor expert for Challenger, Gray & Christmas. “AI was cited for over 10,000 cuts last month, and tariff concerns have impacted nearly 6,000 jobs this year.”
The AI effect
Beyond the more than 10,000 jobs in July that were eliminated specifically due to AI adoption, an additional 20,219 cuts were attributed to “technological updates” including automation and new software workflows. Challenger Gray said this suggests “a significant acceleration in AI-related restructuring.”
While AI’s influence dominates headlines, federal budget cuts—known as the “DOGE Impact”—are another pillar driving this year’s wave of layoffs. The government sector has announced 292,294 job cuts this year, most at the federal level, as courts greenlight sweeping reductions. These have affected not just direct government roles, but also non-profits and healthcare through downstream funding losses, totaling an additional 13,056 layoffs.
Other economic stressors remain ever-present: Market and economic conditions have accounted for 171,083 cuts year-to-date, inflation and weaker demand have shuttered stores and plants (120,226 layoffs), while restructurings and bankruptcies contributed 66,879 and 35,641 cuts, respectively.
Where the layoff storm is hitting
Job cuts are distributed unevenly across the U.S. The East Coast has seen the most dramatic year-over-year increase, rising 219%, spurred by federal agency reductions in Washington, D.C., as well as steep jumps in states like New Jersey (+362%) and New York (+43%). Out West, California has also been roiled by 114,676 layoffs (+50%). In the South, job cuts climbed 34% overall, with Georgia and Florida seeing spikes of over 70%.
The tech sector tops private-sector losses, with 89,251 cuts year-to-date—a 36% jump from last year—reflecting AI’s disruptive role and ongoing work visa uncertainty. Retail has announced 80,487 layoffs so far in 2025, up 249% from a year ago, as inflation and tariffs push more stores to downsize or close their doors. Non-profit job cuts are up 413%, with mounting operational costs compounded by lost federal support. While the automotive sector’s year-to-date layoffs fell 31% from 2024, July alone saw nearly 5,000 jobs lost due to new tariffs, its most affected month since late last year.
Announced hiring plans provide little relief: just 86,132 new jobs have been planned by U.S. employers through July; this has consistently remained well below pre-pandemic levels. Technology hiring continues to slump, down 58% year-over-year with only 5,510 tech positions announced so far in 2025.
For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.
