How AI/Tech Layoffs Are Reshaping the U.S. Economy in 2025

While AI continues to drive innovation and profitability in the tech sector, the increasing number of layoffs are revealing cracks in the overall state of the economy. In 2025, traders are closely watching this disconnect between record-breaking investment in AI as well as a cooling labor market. Traders are most likely looking for signals on where the U.S. economy and markets may head next.

Tech Layoffs Update: Over 75,000 Tech Jobs Lost in 2025 So Far

U.S. tech companies have cut nearly 75,000 jobs between January and May 2025 marking a 35% increase year-over-year. May alone saw over 10,600 new tech layoffs, including major cuts from Microsoft, Meta, and other AI-intensive firms. Companies cite restructuring and AI efficiency as key reasons for the ongoing reductions.

• Google offers buyouts to 1,000 U.S. staff in ad and search teams to reallocate spending toward AI.
• Meta has laid off around 3,700 employees this year, mainly across tech and AI-focused divisions.

Wall Street Reaction: Mixed Signals from Investors

Markets have responded differently to each company's approach. While Meta (META) is up +19% YTD as of early June 2025 rewarded for its aggressive cost-cutting and focus on AI, others haven’t seen the same benefit.

• Amazon (AMZN) rallied over 11% in May, but remains -2% YTD, trading well below its February highs.
• Alphabet (GOOGL) gained ground after Google I/O, but is still –6.3% YTD despite multiple layoffs and strong AI momentum.

The divergence suggests that investors are becoming more selective. Layoffs alone aren’t enough, markets want to see profitable transformation and clear AI monetization paths.

The Broader Economic Impact of Tech & AI Layoffs 2025

Widespread layoffs in the tech sector, a key driver of high-wage employment and innovation, are beginning to show up in national data. Jobless claims have edged higher in recent months, and wage growth is moderating signals that consumer strength could weaken going into the second half of the year.
With the average tech worker earning significantly more than the national average, a slowdown in this sector affects overall consumption, credit demand, and economic sentiment. If this trend persists, it may weigh on GDP growth and contribute to growing expectations of monetary easing later in 2025.

The Fed’s Dilemma: Productivity vs. Pain

Tech layoffs present a complex picture for the Fed. On one hand, rising job cuts hint at a cooling labor market, potentially supporting the case for rate cuts. On the other hand, AI-driven productivity has not yet translated into lower costs.

• Unit labor costs rose 2.2% in Q4 and 6.6% in Q1, keeping services inflation sticky.
• With core PCE near 2.5%, the Fed remains cautious as inflation risks persist.

Fed futures currently price in a 50-55% chance of a rate cut by September 2025 according to Economic analysts, but that view remains highly sensitive to incoming job and inflation data.

A Split Narrative

While AI is driving technological advancement, employment losses are dragging the economy down. Transformation is currently rewarded by markets, but only when it is linked to measurable outcomes. 2025 is being shaped by this tension between innovation and instability.