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Not counting the pandemic, the U.S. job market last year sank to its lowest level since the Great Recession. The nation added only 181,000 jobs in 2025, down from 1.46 million in 2024.
Anemic employment numbers are continuing in 2026, with the U.S. economy shedding 92,000 jobs in February.
Many economists agree that President Trump’s tariffs and immigration policies, along with persistently high interest rates, are partially to blame, but there is increasing concern that the rapid rise of artificial intelligence is also starting to harm the employment sector.
The situation promises to worsen, and the problem is: Companies using AI to replace workers is not a bug. It’s a feature.
In fact, the potential for job losses due to AI is a significant driver of the stock market. Businesses and investors euphemistically call it “labor savings” or “reducing labor costs” – because having fewer workers theoretically makes companies more profitable and a better investment.
Goldman Sachs predicts that companies will spend more than $500 billion this year on capital expenditures for artificial intelligence and computer data centers, in part because of the potential to reduce labor costs – the single-largest expense for most businesses.
Artificial intelligence, to be sure, has tremendous potential to benefit our society, hastening advancements in health care, scientific research and clean energy. AI might even cure some forms of cancer in the next decade.
But it could also put millions of people out of work. Anthropic CEO Dario Amodei, who recently gained fame for his principled stand against the Pentagon’s demand to use Claude for autonomous weapons and domestic mass surveillance, is predicting that AI could displace 50% of entry-level white-collar jobs in the next five years.
For many investors and businesses, that would be a lot of “labor savings”. For the U.S. economy – and the people who will lose their jobs – it would be a major disaster.
If Amodei’s and similar predictions come true, about 10 million to 12 million U.S. workers could become jobless in the next half-decade, more than doubling the U.S. unemployment rate, potentially sending it above 10% – even higher than it was during the Great Recession.
Massive job losses, in turn, would have a cascading effect on our economy and society. Young workers who took on student loans expecting white-collar careers would face serious default risk, potentially triggering a consumer credit crunch. Consumer spending would also tumble, with restaurants, travel, entertainment, and retail all facing reduced demand, potentially causing even more job cuts.
That would put us on the road to a significant economic contraction and another recession. Just counting the loss of entry-level white-collar jobs alone, and assuming an average salary of $60,000–$80,000 for those positions, AI could cause roughly $720 billion to $960 billion in lost wages annually — equivalent to 3% to 4% of U.S. GDP.
Widespread unemployment can also lead to social unrest. Plus, there are concerns about long-term unemployment, since workers who can’t get entry-level job experience are unlikely to ever have professional white-collar careers.
This may sound like a “sky-is-falling”, overly pessimistic scenario. And some argue that the threat of job displacement is overblown, accusing companies of “AI washing” – blaming recent job cuts on AI when they’re actually due to other factors.
But there are warning signs that job loss due to AI is already happening. In addition to the dismal jobs numbers in the past 14 months, postings for entry-level jobs in the U.S. plummeted 35% between 2023 and 2025.
And workers are increasingly worried. Employee concern about job loss caused by AI surged from 28% in 2024 to 40% in 2026.
Anthropic predicts that AI will cause the biggest job losses in management, business and finance, office administration, computer science, engineering and architecture, social sciences, the legal profession, and arts and media.
So what can we do about the potential Jobs Armageddon? Unfortunately, it appears that the Trump administration is not inclined to put any guardrails on AI. Also, Anthropic appears to be the only major AI company concerned about job losses.
That means California must step up. In the Legislature this year, I have a bill, SB 947, that would bar companies from relying on AI to fire or discipline workers.
It’s an important first step. But it’s increasingly clear that we have more to do – perhaps by rewarding companies that hire and keep workers and use AI to improve their workers’ productivity and job satisfaction, while preventing businesses from replacing people with machines and sending our economy into a tailspin.
Editor’s note: State Senator Jerry McNerney (D-Pleasanton) authored the AI in Government Act while serving in Congress. He is also chair of the Senate Revenue and Taxation Committee and member of the Privacy, Digital Technologies, and Consumer Protection Committee.
