U.S. employers announced the fewest job cuts in two years during July, even as artificial intelligence continued to reshape workforce decisions across major industries, according to new data from Challenger, Gray & Christmas.

The monthly Challenger report tracks corporate layoff announcements in real time and serves as an early read on employer workforce intentions, often preceding official government labor data.

Companies planned 33,429 layoffs in July, a 27% decline from the 45,849 cuts announced in June and a 46% drop compared with the 62,075 recorded in July 2025. The monthly total was the lowest since July 2024, when 25,885 job cuts were announced. It also marked the fifth month this year in which layoff figures came in below the corresponding month a year earlier.

Through the first seven months of 2026, employers have announced 477,033 job cuts — a 41% decrease from the 806,383 cuts recorded during the same period in 2025.

"The pace of layoffs fell dramatically this summer. Layoff plans continue to be announced primarily in tech, and artificial intelligence is still the story, as investments in the technology reshape organizations," said Andy Challenger, workplace expert and chief revenue officer at Challenger, Gray & Christmas.

"Hiring has also increased over last year by 25%, so while AI is shifting the labor market, it is not dismantling it," Challenger added.

The technology sector led all industries in July with 9,867 job cuts, bringing its year-to-date total to 149,023 — a 67% increase from the same period last year. Tech layoffs account for 31% of all job cuts announced in 2026. The sector's rising cuts stand in sharp contrast to the broader downward trend, underscoring how AI investment cycles are creating divergent workforce pressures across the economy. Challenger noted that tech "remains the center of gravity for this year's cuts, and AI is still the reason companies give."

Financial firms ranked second, with 3,157 cuts in July, bringing the sector's annual total to 18,626, down 31% from a year ago. Government agencies announced 2,962 cuts during the month, for a year-to-date total of 20,752 — a 93% decline from the same point in 2025, when 292,294 government cuts through July were largely driven by federal workforce reductions.

Across all sectors, AI was the most frequently cited reason for workforce reductions in July, attributed to 10,970 cuts, or 33% of the monthly total. July was the fifth consecutive month in which AI ranked as the top cited cause. So far this year, AI has been named in 112,713 layoff announcements, representing approximately 24% of all cuts. Since the firm began tracking AI as a distinct category, Challenger, Gray & Christmas has recorded 184,538 job cuts linked to the technology.

The report highlighted ongoing ambiguity around what qualifies as an AI-related reduction. Some employers explicitly cite AI as a factor, while others reference new technology deployments and allude to AI indirectly. Challenger, Gray & Christmas tracks these announcements in a separate category as a result.

"Naming AI in a layoff announcement can win over investors while pushing current and prospective employees away. That's why the messaging has swung from hedging to aggressively citing it," Challenger said.

"As regulations start to take shape, companies will be even more careful in their announcements, which would make tracking the impact of AI on jobs more opaque," he added.

The regulatory landscape Challenger referenced is taking form on multiple fronts. The EU AI Act, which entered into force in August 2024 with phased compliance deadlines through 2026, classifies AI systems used in employment and worker management as high-risk, triggering transparency and oversight requirements. In the U.S., New York City's Local Law 144 has required bias audits for automated employment decision tools since July 2023, and several states have enacted or proposed comparable measures governing AI in hiring and workforce decisions.