Something that has radically altered how firms function and hire has plunged the American economy into turmoil and irregularity. No, not artificial intelligence. Despite concerns that AI might instantly replace millions of people, new study from the Yale Budget Lab indicates that the technology hasn’t had a greater impact on economic opportunities than earlier innovations. Instead, it appears that the Trump administration’s policies are costing individuals the greatest economic potential, at least for the time being.
Although there has been a lot of talk about the possibilities of artificial intelligence since ChatGPT was released in November 2022, there isn’t much proof that the technology is causing job losses just yet. A examination of the labor market conducted over the past 33 months by the Yale Budget Lab finds no indication that AI automation has caused a widespread loss of employment or even altered the demand for cognitive work in the economy as a whole.
This is not to argue that the employment market is unaffected by AI. The “occupational mix,” or the kind of work that people are performing, is changing more quickly as a result of AI tools than it has with earlier innovations like the arrival of computers or the internet, according to Yale researchers. Therefore, although AI may be causing people to change occupations or the way they perform them more quickly, fewer jobs are being created as a result of it as of yet. Even so, the rate of change is not unexplainable; rather, it is only marginally quicker than the 2016 job market, which served as the study’s control marker.
Regarding the effect of AI on the job market, “There has been a lot of hype, but no real impact yet,” Cynthia Meis, Director of Career Services at the University of Iowa Tippie College of Business, told Gizmodo. She did, however, point out that there are some indirect effects of AI that could be causing people to feel as though the labor market is slowing down. Many businesses are proceeding more carefully as a result of the “threat” posed by AI. She clarified that instead of growing rapidly, they are adopting a cautious approach to headcount, which slows down the hiring and recruitment processes.
It’s also taking a toll on job searchers, who are trapped in a loop of hurry up and wait with companies that want to hire but are forced to go through slower recruiting processes. Employers are telling us they want numerous touchpoints with prospects, such as a job fair, a virtual session, or even an informational meeting with current workers, before moving further, according to Meis. “I think it’s worth mentioning this is frustrating and exhausting for job candidates.”
While AI isn’t killing jobs, jobs are being killed. America’s private sector employers reduced their workforce by 3,000 in August, according to a report released by payroll company ADP and the Stanford Digital Economy Lab. This was a decrease from the initial report’s estimate of 54,000 job additions, which already indicated a stagnating labor market before going negative. Even worse are the preliminary figures for September, which indicate a loss of 32,000 positions.
According to statistics recently issued by the outplacement agency Challenger, Gray and Christmas, businesses around the economy announced 117,313 new employment in September, which is the poorest September on record since 2011 and a 71% decrease from the same period last year. As of now, the firm has only created 205,000 new employment across US employers, which is the lowest number since 2009, when the nation was experiencing a financial crisis brought on by the collapse of the housing market. Furthermore, since January, firms have declared (but not necessarily carried out) plans to eliminate 946,426 positions, according to the company. Since the epidemic in 2020, that is the largest number ever recorded.
Plans for job cuts are probably going to reach one million for the ninth time in our series and for the first time since 2020. Andy Challenger, Senior Vice President and labor expert for Challenger, Gray and Christmas, said in a statement that previous periods with this many job cuts happened either during recessions or, as was the case in 2005 and 2006, during the first wave of automations that claimed jobs in technology and manufacturing.
AI is not the cause of these losses, to reiterate. According to Challenger’s research, the introduction of automation and artificial intelligence has resulted in almost 20,000 job losses so far this year. In contrast, the Trump administration’s activities may be directly linked to the largest contributors. The business discovered that approximately 300,000 anticipated layoffs have resulted from DOGE Actions, which include direct cutbacks in employment at government agencies and the loss of financing for non-profit and research groups.
Trump and his administration have made it a point to threaten permanent layoffs during the present government shutdown, which is a clear indication that they don’t respect government work. However, his actions are not only harming government employees; they are also severely damaging the private sector. Market and economic conditions, including as inflation and Trump’s tariffs, are the second most common reason for worker cutbacks, accounting for about 210,000 jobs to far, according to challenger statistics.
According to reports, the Trump administration’s policy of punitive tariffs on foreign manufacturing were supposed to boost certain industries, but the outcomes have been negative. The manufacturing sector has shed 42,000 jobs overall since Trump’s “Liberation Day” statement on April 2, according to data from the Bureau of Labor Statistics, and its growth is weaker than it was in 2024.
Trump has also claimed that his crackdown on undocumented laborers and mass deportation effort, which has led to the cruel and probably unlawful treatment of migrants, will increase American employment and salaries. Nothing of that sort has come to pass. According to the most recent Job Openings and Labor Turnover Survey from the Bureau of Labor, there are more job seekers than there are open positions in the nation for the first time since 2021. ADP data shows that since Trump took office, salary growth has also slowed for low-paid workers nationwide, while top earners’ incomes have continued to rise, leading to a widening of the wage gap.
However, what has occurred is that businesses that are in dire need of competent workers are now more unsure. Employers are already taking notice of the Trump administration’s new rule that involves paying a $100,000 charge to applicants for an H1-B visa, which permits foreign workers in specialized fields to work in the United States. International recruiting, particularly the H-1B procedure, is another topic that receives a lot of attention. Employers have always been at risk, but in sectors like healthcare and technology, where there is a genuine talent scarcity, that risk seems increased, Meis told Gizmodo.
While salary growth has not come from those who need it the most, the cost of living is rising—again, a direct outcome of Trump’s policies. According to the University of Michigan, inflation will increase to 4.7% in the upcoming year, whereas the Bureau of Economic Analysis reports that consumer prices have increased by 2.7% in the previous year. While earnings are stagnant and possibilities are decreasing, the expense of living is rising. The Trump administration’s economic policy is closely related to all of that.
If there is one economic impact of AI that warrants attention, it is the possibility that all of the industry’s expenditures are purposefully preventing the economy’s bottom from dropping. Many analysts, including George Saravelos of Deutsche Bank, said last month that if it weren’t for the expenditures related to the AI sector, the nation would already be in a recession. This spending is seen by many as unsustainable and unlikely to generate the returns required to justify the large sums of money invested in data centers and other projects.
Clearly, Trump is a fan of AI. He can create the appearance of a thriving economy. Expect that delusion to pass quickly.
