The layoff wave that began in late 2025 shows no signs of slowing, with 10 major companies announcing thousands of job cuts in just the first two months of 2026. But unlike previous downturns, these layoffs are happening against the backdrop of an expanding economy—raising questions about what's really driving the cuts.
The answer, in most cases, isn't recession. It's efficiency plays and AI displacement.
Technology companies continue to lead the cuts, with SAP, Cisco, and Intel each announcing reductions of 2,000+ positions. But the trend has spread beyond tech: Macy's is closing underperforming stores and cutting corporate staff, UPS is eliminating management layers, and BlackRock is consolidating back-office functions.
What makes these cuts unusual is the economic context. GDP growth is running at 2.5%, unemployment sits at 4.1%, and corporate profits are near record highs. These aren't distressed companies cutting to survive—they're profitable enterprises optimizing for higher margins.
The driving force is a fundamental shift in how white-collar work gets done. AI tools can now handle tasks that previously required junior analysts, customer service representatives, and mid-level managers. Companies are discovering they can maintain or increase output with fewer people, and Wall Street rewards those efficiency gains with higher valuations.
SAP's CEO made this explicit in the company's restructuring announcement, noting that AI-powered tools would handle routine software customization work previously done by consultants. Cisco cited automation in network management. BlackRock pointed to AI-driven portfolio analytics.
The numbers are stark: Technology sector layoffs in Q1 2026 are running at 35% higher levels than the same period in 2025, even as tech company revenues and profits have grown. That divergence—rising profits, falling headcount—is historically unusual outside of recessions.
For workers, the implications are sobering. These aren't temporary cyclical cuts that reverse when the economy improves—they're structural changes that eliminate entire job categories. The junior analyst who spent two years building spreadsheets? That role increasingly doesn't exist. The customer service rep reading from scripts? Replaced by an AI agent.
Labor economists are watching closely for signs of what they call "jobless growth"—where the economy expands but employment doesn't keep pace because productivity gains come from automation rather than hiring. If that pattern takes hold, it would mark a significant shift in how economic expansion translates to household income.
The white-collar workforce has enjoyed relative insulation from automation for decades. Factory workers, cashiers, and truck drivers faced technological displacement, but office workers generally didn't. That insulation is eroding, and companies are moving faster than many employees anticipated.
Not all 10 companies cited AI as the primary driver—some are responding to changing consumer behavior or competitive pressures. But the common thread is optimization: doing more with less, improving margins, and using technology to reduce labor costs.
For investors, these efficiency plays boost earnings per share and free cash flow. For workers, they mean fewer opportunities and more competition for remaining positions. The divergence between shareholder returns and employee security has rarely been more visible. The numbers don't lie: when profits rise and headcount falls, someone is getting squeezed.
