U.S. initial jobless claims rose to a three-month high last week, with AI-related job displacement pushing tech industry layoffs to a nearly two-year high.

U.S. initial jobless claims rose to a three-month high last week, with AI-related job displacement pushing tech industry layoffs to a nearly two-year high.

The U.S. labor market is facing dual pressures: unemployment claims have risen to a nearly three-month high, while at the same time, the wave of layoffs in the tech industry is expanding, and artificial intelligence is reshaping the employment landscape at an unprecedented speed.

According to the latest data, the number of first-time unemployment benefit claims in the U.S. last week rose to 225,000, higher than the market expectation of 215,000, marking the highest level in nearly three months. Meanwhile, a report by outplacement agency Challenger, Gray & Christmas shows that layoffs announced by U.S. tech companies in May reached the highest level in nearly two years, mainly because companies are accelerating their bets on artificial intelligence.

Artificial intelligence has been the primary reason for corporate layoffs for three consecutive months, with 38,579 positions announced as AI-related layoffs in May, setting a single-month historical record since Challenger began tracking this data in 2023, accounting for 40% of all layoffs in May. In January, this proportion was only 7%. "The labor market is being reshaped in real-time by technology," said Andy Challenger, Chief Revenue Officer of Challenger, "AI is now the primary reason companies cite for layoffs."

Initial claims spike, but continued claims remain low

Last week, first-time unemployment claims rose to 225,000, exceeding market expectations by 10,000, hitting a nearly three-month high. Regionally, California saw the largest increase in claims, while Texas recorded the largest decrease.

Despite the spike in initial claims, continued claims for unemployment benefits remain relatively steady, dropping to 1.777 million, staying below the critical threshold of 1.8 million, near a two-year low. Overall, current data is still within the normal fluctuation range of the past five years and has not yet signaled substantial deterioration in the labor market.

Tech layoffs hit new two-year high, AI is the main reason

Challenger’s report shows that the tech industry announced 38,242 layoffs in May, the highest monthly record since August 2024. Meta Platforms, Intuit, and Cisco Systems have all announced large-scale AI-related layoffs, mostly concentrated in white-collar positions.

Looking at the annual data, AI has been cited as the reason for 87,714 layoff positions so far in 2026, accounting for 22% of all layoffs this year, far exceeding the 54,836 AI-related layoffs for the entire year of 2025. The proportion of AI-related layoffs rose rapidly from 7% in January to 25% in March, 26% in April, and 40% in May, drawing significant attention for its quick ascent.

Notably, despite frequent layoff announcements, unemployment insurance claims have not shown a significant increase, reflecting that this round of layoffs is relatively targeted, mainly focused on specific white-collar groups, and has not caused a systemic shock to the overall labor market.

"Low hiring, low layoffs" pattern continues, overall private sector remains stable

The wave of tech industry layoffs has not spread to the broader private sector. Challenger data shows that in the first five months of this year, the total number of private sector layoff announcements is down 7% from the same period last year, confirming that most industries continue the "low hiring, low layoffs" trend.

Hiring has also remained subdued. As of May 2026, planned hires announced by U.S. employers totaled 80,472, slightly higher than the 79,741 in the same period in 2025. Yet by pre-pandemic historical standards, the number of hiring announcements is still at a low level. This means that while the labor market has not witnessed large-scale unemployment, the creation of new jobs is likewise constrained, presenting an overall fragile dynamic balance.

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