The unexpected 92,000 drop in payrolls is a clue we might be reading the AI jobs narrative all wrong
The shocking news that U.S. payrolls dropped by 92,000 in February—market watchers were expecting a 50,000 gain—trained the spotlight on what’s probably today’s most worrisome issue for everyone from money managers to Main Street shareholders to office workers: What’s the looming impact of AI on jobs? The widely accepted view, of course, holds that AI has already started generating gigantic efficiency gains empowering enterprises to do everything quicker and better while deploying far fewer people. But is that what’s really going on? Or is it possible there’s another explanation?
We know there’s been a huge jump in global capital spending on AI, a number that Gartner expects to reach $2.5 trillion this year, up 44% over 2025. And that money’s got to come from somewhere. So some experts are starting to theorize that the narrative is backwards: Companies aren’t curbing headcount because AI’s accelerating their processes right now. Instead, they’re offsetting a lot of those lavish AI outlays by tightening the biggest expense item on their income statements, labor costs.
That’s the view of Brad Conger, chief investment officer at Hirtle Callaghan, a firm that manages $25 billion on behalf of such clients as charitable institutions and college endowments. He’s not buying the “AI’s doing all those peoples’ jobs right now or soon” argument. “You see it at our company,” he told Fortune. “We’ve bought five different AI software products in the past six months. AI is better at little functions, but doesn’t replace people overall. A job does 100 things in a day, and that’s a lot more than a single AI workflow can perform. It replaces activities that are just pieces of jobs. We have programmers who have to de-bug what AI produces.” Conger avows that at his shop, AI’s adoption hasn’t cost a single job.
On the other hand, he views Jack Dorsey’s explanation for Block’s recent decision to cut 10,000 employees, 40% of the total, as pure camouflage. Dorsey avows that “This decision comes from a position of strength. Intelligence tools have changed what it means to run a company. A significantly smaller team using the tools we’re building can do more and do it better.” Conger theorizes instead that Block way over-hired by more than doubling its workforce since 2019. “Block is an incredibly inefficient business,” he argues. “Now they say AI made them more productive and therefore they can lay off people. They had no choice but to pivot. AI’s an excuse for the inevitable.”
Conger contends that for the big spenders on the technology, including Block, “AI’s not replacing jobs, but job cuts are funding AI expenditures.” Several sprinters in the race are indeed implying that workforce reductions help pay for their AI outlays. In unveiling layoffs of 1,700 or 8.5% in February, Workforce CEO Carl Eschenbach declared that the cuts were necessary to prioritize AI investment and free up resources. Between October and January, Amazon announced that it’s slashing 30,000 positions. The cuts coincide with an explosion in the internet giant’s capex, which more than doubled from $53 billion in 2023 to $133 billion last year. In 2026, Amazon CEO Andy Jassy is pledging a blowout reaching $200 billion. Beth Galetti, SVP for people experience and technology, stated that Amazon’s “shifting resources to ensure we’re investing in our biggest bets and what matters most to our customers” in a campaign “to be organized more leanly, with fewer layers and more ownership.”
Other leaders who’ve cut workers big time don’t explicitly cite shrinking payrolls as a way to save cash they can re-channel into AI. Rather, they trumpet that AI is already substituting for people. Microsoft’s mass layoffs of 15,000 last year came as its AI-driven capex followed a soaring trajectory resembling Amazon’s. CEO Satya Nadella explained that the Windows and Azure titan needs to “reimagine its mission for a new era” via AI. Following layoffs of 4,000 in September and 10,000 in February, Salesforce co-founder and CEO Marc Benioff asserted that AI is already performing 50% of all the work at the top CRM platform. In May, CrowdStrike chief George Kurtz pointed to AI in announcing cuts a cut of 500. “AI flattens the hiring curve, and helps us innovate from idea to product faster,” Kurtz contended.
As Conger acknowledges, we simply don’t know if AI will eventually allow companies to work just as well, or even significantly better, using far fewer employees. But he doesn’t see it now. Instead, Conger finds that what’s regarded as totally transformative technology is often getting trotted out as a ruse for cuts to bloated workforces that had to happen anyway, or as a wager on the miracles to come. Unfortunately, America’s workers may be paying for that wager.
This story was originally featured on Fortune.com