Are you running leaner, or just running scared? The recent wave of layoffs, even at profitable companies, signals a shift in how businesses are approaching growth and efficiency. Understanding these trends can help you anticipate market changes and adapt your strategy to survive – and thrive.
The "Forever Layoff" Trend
The start of 2026 has seen a significant jump in layoffs. U.S.-based employers announced 108,435 job cuts in January, a 118% increase compared to January 2025 [1]. This isn't just about struggling companies; even profitable ones are trimming their workforce.AI as a Scapegoat?
While some companies directly cite AI as a reason for layoffs, experts suggest it might be a convenient excuse. Some economists argue that companies may be using AI as a pretext for broader cost-cutting measures [3]. "I don't think these companies are doing layoffs because they know AI can replace workers, but I think they're investing in it," said Andrew Stettner, senior director for economic security at the National Employment Law Project.Heineken, for example, plans to cut up to 6,000 jobs, with CEO Dolf van den Brink stating that AI is "partly" behind the plan [2]. Baker McKenzie, a top law firm, also conducted "massive staff layoffs" among its global business services team, reportedly due to increased AI use [3].
Be wary of “AI-washing" – exaggerating the role of AI to justify decisions rooted in other factors. In January, employers cited AI in announcing nearly 8,000 layoffs, accounting for 7% of the total [1].
The Impact on Employees
Successive waves of layoffs, or "forever layoffs," can significantly impact employee morale. Chris Martin, lead researcher on Glassdoor’s economic research team, notes that this "drip, drip, drip" approach can wear down workers [6]. "It has a compounding impact on engagement because you get knocked down by the first layoff and just as you’re getting back up again, there’s another wave, and it’s really hard for employees to recover from that.”Beth Galetti, Amazon’s vice president of people experience and technology, addressed employee concerns about recurring layoffs, stating, "Some of you might ask if this is the beginning of a new rhythm—where we announce broad reductions every few months. That’s not our plan." Time will tell if that holds true.
This trend can also create a "great employee-leader divide," where workers become skeptical of leadership decisions. Bosses’ growing leverage has made workers "highly skeptical of what their leaders say and the decisions they make."
Beyond AI: Other Contributing Factors
Several factors contribute to the current wave of layoffs. Some companies are correcting for over-hiring during the pandemic-era talent crunch. As Chris Martin from Glassdoor explains, "It’s companies that are doing well, but they’re deciding to boost profitability by removing some headcount.”Laura Ullrich, Director of Economic Research in North America at the Indeed Hiring Lab, points out that many layoffs are concentrated at companies that over-hired or are making large AI investments [1]. UPS, for example, has announced planned job cuts over the course of the year [1].
Companies & Funding
- Amazon: Publicly traded.
- Heineken: Publicly traded.
- Baker McKenzie: Private partnership.
- Salesforce: Publicly traded.
- UPS: Publicly traded.
The Bigger Picture
- The rise in layoffs, despite profitability, indicates a shift towards prioritizing efficiency and cost reduction.
- Companies may be using AI as a cover for broader cost-cutting initiatives, leading to employee distrust.
- The "forever layoff" trend can negatively impact employee morale and productivity.
- Businesses need to be transparent and strategic in their approach to workforce management to maintain employee trust and engagement.
- The labor market remains uncertain, with low hiring rates exacerbating the impact of layoffs on workers.
