U.S. employers reduced payrolls by 97,000 in May, with artificial intelligence cited as the leading driver for job cuts for the third consecutive month. Challenger, Gray & Christmas said AI accounted for 38,579 of the May layoffs, representing 40% of all reported cuts, and marking the highest monthly total since Challenger began tracking the data in 2023. The May tally comes as the technology sector reported 38,242 cuts—the sector’s highest May total since August 2024—and as overall first-half 2026 job-cut activity remains concentrated in tech and related services.
The Challenger report shows that 97,006 layoffs were announced in May, up 16% from April’s 83,387 and up 3% from May of last year. The series tracks companies’ voluntary workforce reductions and reflects a broader trend of corporate restructuring linked to rapid AI adoption. Andy Challenger, labor and workplace expert and chief revenue officer at Challenger, Gray & Christmas, said the labor market is being reshaped by technology in real time, with AI now the foremost reason employers cite for cuts and with technology firms leading the charge.
Beyond tech, other sectors contributed to May’s total. The transportation sector recorded 6,909 cuts in May, lifting its 2026 year-to-date total to 40,388 and marking a 449% gain versus a year earlier. Services firms accounted for 6,268 May layoffs, bringing their 2026 total to 17,065, though that figure remained well below last year’s pace. Healthcare and products manufacturers together disclosed 30,414 job cuts so far in 2026, a 17% year-over-year increase. Bankruptcy-related layoffs were the second-most common reason cited in May, with 5,637 such layoffs.
The data also show that mergers and acquisitions-linked job cuts rose sharply, climbing more than sixfold from 1,889 in the prior year to 11,989 so far in 2026. Challenger emphasized that AI is reshaping the outlook for the workforce, but also suggested that AI could ultimately boost productivity and create new roles as firms adjust operations to an AI-enabled environment.
US economists and market participants will be watching how ongoing AI deployment interacts with inflation, consumer spending, and the health of the labor market in the coming months, as companies continue to recalibrate staffing in response to technological advances and capital investment in AI tools.
