The U.S. labor market showed signs of stagnation this summer, with employers adding only 22,000 jobs in August, significantly below expectations. The unemployment rate slightly increased to 4.3 percent, indicating a decline in both hiring and job-seeker enthusiasm. This marks the first net job loss since December 2020, with a revised decrease of 13,000 jobs reported for June. According to Diane Swonk, chief U.S. economist for KPMG, a low pace of hiring and layoffs creates a precarious situation for new job seekers. Additionally, average hourly earnings grew by 3.7 percent from the previous year, the slowest increase since July 2024, raising concerns about wages potentially falling behind inflation.
For the first time in four years, the number of unemployed individuals surpassed job openings, with a ratio dropping to nearly one-to-one. Heather Long, chief economist at Navy Federal Credit Union, noted that the job market is “frozen,” making it difficult for job seekers to find employment.
But it’s not AI. A recent survey by the Federal Reserve Bank of New York indicates that the adoption of artificial intelligence in the U.S. labor market is not leading to widespread job losses. In fact, only 1% of service firms reported job cuts due to AI, while none of the surveyed manufacturers have reduced their workforce as a result of AI use. The survey highlighted a significant increase in AI utilization, with 40% of service firms employing AI in the past six months, compared to just 25% the previous year. Furthermore, while 12% of service firms hired fewer people because of AI, 11% are actively seeking workers skilled in AI technologies. Richard Deitz, an economic policy advisor at the New York Fed, emphasized that instead of layoffs, many firms are retraining their existing employees, reflecting a shift in hiring practices rather than outright job losses.
CompTIA broke down the tech jobs numbers. In August, the number of tech jobs across all sectors increased by approximately 247,000, bringing the unemployment rate for tech occupations to 3%. However, tech companies themselves reduced staffing levels by a net total of 2,311 positions. Job postings in the tech sector dropped by 2.6% from July, totaling 446,763 active listings. Notably, there was a significant increase in postings requiring skills in artificial intelligence, with a 94% rise compared to the same month last year.
Return-to-office mandates are prompting many workers to leave their jobs, while simultaneously helping employers reduce their workforce without resorting to layoffs. According to business leaders who spoke to the Federal Reserve’s Beige Book, these mandates have led to attrition rather than formal layoffs, confirming suspicions that requiring employees to return to the office may serve as a disguised means of workforce reduction. The push for return-to-office policies is also noted to coincide with employers implementing stricter performance metrics and reducing benefits. As a result, many employees are opting to quit rather than comply with these mandates, effectively making layoffs less costly for employers, as those who resign are typically ineligible for severance and health benefits.
Why do we care?
Let’s cut through the noise: the job market just hit the brakes. Only 22,000 jobs added in August? That’s not a slow month—that’s a stall. And the kicker? It’s not AI. Despite all the doomsaying, AI isn’t eating jobs—yet. Only 1% of service firms report layoffs because of it, and manufacturers? Zero. So, the robots aren’t here to fire us… they’re just making everything messier.
What is changing is job structure. Companies are retraining workers instead of firing them. AI job postings are through the roof—up 94% year-over-year. So, the jobs are out there… if you speak AI.
Meanwhile, return-to-office mandates are becoming layoff-lite. Don’t want to come back? Fine—quit. That’s attrition without severance. Efficient, maybe, but it’s a quiet war on flexibility.
And here’s where MSPs should pay attention: clients are pulling back, job counts are volatile, and the AI buzz is high but hollow. You want to win in this market?
Focus on outcomes. Help clients use AI, train their people, and measure the results. If you’re viewed as driving revenue, you’re essential. That’s the strategic move.