AI and economic pressures reshape tech jobs amid layoffs

Tech layoffs have continued in 2025. Much of that is being blamed on a combination of a slower economy and the adoption of automation via artificial intelligence.

Nearly four in 10 Americans, for instance, believe generative AI (genAI) could diminish the number of available jobs as it advances, according to a study released in October by the New York Federal Reserve Bank.

And the World Economic Forum’s Jobs Initiative study found that close to half (44%) of worker skills will be disrupted in the next five years — and 40% of tasks will be affected by the use of genAI tools and the large language models (LLMs) that underpin them.

In April, the US tech industry lost 214,000 positions as companies shifted toward AI roles and skills-based hiring amid economic uncertainty. Tech sector companies reduced staffing by a net 7,000 positions in April, an analysis of data released by the US Bureau of Labor Statistics (BLS) showed.

This year, 137 tech companies have fired 62,114 tech employees, according to Layoffs.fyi. Efforts to reduce headcount at government agencies by the unofficial US Department of Government Efficiency (DOGE) saw an additional 61,296 federal workers fired this year.

Kye Mitchell, president of tech workforce staffing firm Experis US, believes the IT employment market is undergoing a fundamental transformation rather than experiencing traditional cyclical layoffs. Although Experis is seeing a 13% month-over-month decline in traditional software developer postings, it doesn’t represent “job destruction, it’s market evolution,” Mitchell said.

“What we’re witnessing is the emergence of strategic technology orchestrators who harness AI to drive unprecedented business value,” she said.

For example, organizations that once deployed two scrum teams of ten people to develop high-quality software are now achieving superior results with a single team of five AI-empowered developers.

“This isn’t about cutting jobs; it’s about elevating roles,” Mitchell said.

Specialized roles in particular are surging. Database architect positions are up 2,312%, statistician roles have increased 382%, and jobs for mathematicians have increased 1,272%. “These aren’t replacements; they’re vital for an AI-driven future,” she said.

In fact, it’s an IT talent gap, not an employee surplus, that is now challenging organizations — and will continue to do so.

With 76% of IT employers already struggling to find skilled tech talent, the market fundamentals favor skilled professionals, according to Mitchell. “The question isn’t whether there will be IT jobs — it’s whether we can develop the right skills fast enough to meet demand,” she said.

For federal tech workers, outdated systems and slow procurement make it hard to attract and keep top tech talent. Agencies expect fast team deployment but operate with rigid, outdated processes, according to Justin Vianello, CEO of technology workforce development firm SkillStorm.

Long security clearance delays add cost and time, often forcing companies to hire expensive, already-cleared talent. Meanwhile, modern technologists want to use current tools and make an impact — something hard to do with legacy systems and decade-long modernization efforts, he added.

Many suggest turning to AI to will solve the tech talent shortage, but there is no evidence that AI will lead to a reduction in demand for tech talent, Vianello said. “On the contrary, companies see that the demand for tech talent has increased as they invest in preparing their workforce to properly use AI tools,” he said.

A shortage of qualified talent is a bigger barrier to hiring than AI automation, he said, because organizations struggle to find candidates with the right certifications, skills, and clearances — especially in cloud, cybersecurity, and AI. Tech workers often lack skills in these areas because technology evolves faster than education and training can keep up, Vianello said. And while AI helps automate routine tasks, it can’t replace the strategic roles filled by skilled professionals.

Seven out of 10 US organizations are struggling to find skilled workers to fill roles in an ever-evolving digital transformation landscape, and genAI has added to that headache, according to a ManpowerGroup survey released earlier this year.

Job postings for AI skills surged 2,000% in 2024, but education and training in this area haven’t kept pace, according to Kelly Stratman, global ecosystem relationships enablement leader at Ernst & Young.

“As formal education and training in AI skills still lag, it results in a shortage of AI talent that can effectively manage these technologies and demands,” she said in an earlier interview. “The AI talent shortage is most prominent among highly technical roles like data scientists/analysts, machine learning engineers, and software developers.”

Economic uncertainty is creating a cautious hiring environment, but it’s more complex than tariffs alone. Experis data shows employers adopting a “wait and watch” stance as they monitor economic signals, with job openings down 11% year-over-year, according to Mitchell.

“However, the bigger story is strategic workforce planning in an era of rapid technological change. Companies are being incredibly precise about where they allocate resources. Not because of economic pressure alone, but because the skills landscape is shifting so rapidly,” Mitchell said. “They’re prioritizing mission-critical roles while restructuring others around AI capabilities.”

Top organizations see AI as a strategic shift, not just cost-cutting. Cutting talent now risks weakening core areas like cybersecurity, according to Mitchell.

Skillstorm’s Vianello suggests that IT job hunters should begin to upgrade their skills with certifications that matter: AWS, Azure, CISSP, Security+, and AI/ML credentials open doors quickly, he said.

“Veterans, in particular, have an edge; they bring leadership, discipline, and security clearances. Apprenticeships and fellowships offer a fast track into full-time roles by giving you experience that actually counts. And don’t overlook the intangibles: soft skills and project leadership are what elevate technologists into impact-makers,” Vianello said.

Skills-based hiring has been on the rise for several years, as organizations seek to fill specific needs for big data analytics, programing (such as Rust), and AI prompt engineering. In fact, demand for genAI courses is surging, passing all other tech skills courses spanning fields from data science to cybersecurity, project management, and marketing.

“AI isn’t replacing jobs — it’s fundamentally redefining how work gets done. The break point where technology truly displaces a position is when roughly 80% of tasks can be fully automated,” Mitchell said. “We’re nowhere near that threshold for most roles. Instead, we’re seeing AI augment skill sets and make professionals more capable, faster, and able to focus on higher-value work.”

Leaders use AI as a strategic enabler — embedding it to enhance, not compete with, human developers, she said.

Some industry forecasts predict a 30% productivity boost from AI tools, potentially adding more than $1.5 trillion to global GDP.

For example, AI tools are expected to perform the lion’s share of coding. Techniques where humans use AI-augmented coding tools, such as “vibe coding,” are set to revolutionize software development by creating source code, generating tests automatically, and freeing up developer time for innovation instead of debugging code. 

With vibe coding, developers use natural language in a conversational way that prompts the AI model to offer contextual ideas and generate code based on the conversation.

By 2028, 75% of professional developers will be using vibe coding and other genAI-powered coding tools, up from less than 10% in September 2023, according to Gartner Research. And within three years, 80% of enterprises will have integrated AI-augmented testing tools into their software engineering tool chain — a significant increase from approximately 15% early last year, Gartner said.

A report from MIT Technology Review Insights found that 94% of business leaders now use genAI in software development, with 82% applying it in multiple stages — and 26% in four or more.

Some industry experts place genAI’s use in creating code much higher. “What we are finding is that we’re three to six months from a world where AI is writing 90% of the code. And then in 12 months, we may be in a world where AI is writing essentially all of the code,” Anthropic CEO Dario Amodei said in a recent report and video interview.

“The real [AI] transformation is in role evolution. Developers are becoming strategic technology orchestrators,” Mitchell from Experis said. “Data professionals are becoming business problem solvers. The demand isn’t disappearing; it’s becoming more sophisticated and more valuable.

“In today’s economic climate, having the right tech talent with AI-enhanced capabilities isn’t a nice-to-have, it’s your competitive edge,” she said.