Need to Know Briefing | May 11: CEOs Are Splitting on What AI Means for Headcount

April Jobs Report: Economy Added 115,000 Jobs, Defying Expectations

The U.S. economy added 115,000 jobs in April, more than double the 55,000 analysts had forecast, with the unemployment rate holding steady at 4.3% and 7.4 million people out of work. Health care led sector gains at 37,000 new jobs, consistent with its 12-month average of 32,000 per month. Transportation and warehousing added 30,000 jobs, driven largely by couriers and messengers, while retail trade grew by 22,000. The federal government shed another 9,000 positions, and the information sector lost 13,000 — extending a decline that has now eliminated 342,000 jobs, or 11% of the sector, since its November 2022 peak.

The labor force participation rate edged down to 61.8%. The number of workers employed part time for economic reasons — those who want full-time work but had hours cut or couldn't find it — rose by 445,000 to 4.9 million. Average hourly earnings rose 0.2% to $37.41, with year-over-year wage growth at 3.6%. On the private sector side, ADP's National Employment Report put April gains at 109,000 — the strongest reading since January 2025 — with education and health services leading all sectors at 61,000 jobs added and professional and business services the lone major sector to contract at -8,000.

The March JOLTS report, released this week, showed hiring rebounding to 5.6 million after a weak February, with the quits rate ticking up to 2.0% — a modest signal that worker confidence in job mobility may be improving. Job openings held flat at 6.9 million, keeping the ratio of vacancies to unemployed workers at 0.9, down from the 2-to-1 peak in 2022.

Read more via The New York Times, Bureau of Labor Statistics, The Wall Street Journal, ADP, CNBC, Bloomberg

AI Led the Layoffs — and Corporate Leaders Are Split on What to Do Next

AI-related job cuts accounted for 26% of all U.S. layoffs in April — 21,490 of 88,387 total — according to outplacement firm Challenger, Gray & Christmas, marking the second consecutive month AI has been the top driver of workforce reductions. Overall cuts rose 38% from March to April, with the technology sector accounting for the largest share at 33,361 cuts. Layoffs in professional and business services — the sectors most exposed to AI displacement — rose by 150,000 in March compared to a year earlier, per Bureau of Labor Statistics data cited by Yardeni Research.

As AI reshapes white-collar work, a clear divide is forming among corporate leaders over what to do with the productivity gains. Coinbase is cutting 14% of its workforce and PayPal plans to reduce headcount 20% over the next two to three years, both citing AI adoption. Meta's CFO told investors the company doesn't yet know what its optimal size will be as AI takes on more work. A Gartner survey of 350 mid-level and above executives found that roughly 80% of companies using AI agents or autonomous technologies are cutting staff as a result.

On the other side: Spotify is keeping headcount flat and using AI to ship more product. Axon Enterprise's president personally emailed all 5,000-plus employees to assure them AI would not trigger layoffs, describing it as a capacity multiplier rather than a replacement. IBM's chief human resources officer predicted the company will employ more people in three years, not fewer, and warned that organizations using AI solely for efficiency risk missing its larger opportunity. At some companies, a third path is emerging — employees shifting into new roles as AI absorbs their current responsibilities.

Read more via Challenger, Gray & Christmas, CBS News, The Wall Street Journal

Coinbase and Cloudflare Join the List of Companies Crediting AI for Workforce Cuts

Coinbase is eliminating 14% of its workforce, with CEO Brian Armstrong citing a shift toward "tiny teams" — some consisting of a single person and their AI agents — and the elimination of what he called a "coordination tax," or layers of management that slow the business down. Armstrong said engineers are now using AI to ship in days what used to take a team weeks, and the company is moving away from "pure manager" roles in favor of requiring all employees to do hands-on work. Cloudflare is laying off more than 1,100 employees globally as it accelerates a shift to an agentic AI-first operating model; CEO Matthew Prince reported that Cloudflare's internal AI usage grew more than 600% in the past three months, with staff across engineering, HR, finance, and marketing running thousands of AI-driven workflows daily. Both companies join more than two dozen major organizations that have cited AI alongside cost pressures in announcing significant workforce reductions in 2026.

Read more via Business Insider, Bloomberg

The EEOC Is Targeting Major Employers Over DEI Programs

The Trump administration's Equal Employment Opportunity Commission has filed suit against The New York Times and escalated its investigation of Nike, framing both actions as part of a broader push to reframe DEI programs as unlawful discrimination against white workers. The Times lawsuit alleges the paper passed over a white male editor for a deputy real estate editor role in 2025 because of his race and sex, citing the company's own published diversity goals as evidence of discriminatory intent. The Times called the suit politically motivated and said it hired the most qualified candidate. The EEOC's sole Democratic commissioner voted against the case, saying she disagreed with the substance and questioned the use of scarce agency resources on it.

The Nike investigation carries broader implications. Filed as a subpoena enforcement action in February, it alleges a pattern of discrimination against white employees through race-restricted mentoring programs, leadership development tracks, and the use of race data in executive compensation decisions. Notably, the investigation was not triggered by an employee complaint — EEOC Chair Andrea Lucas opened it herself, a move legal experts say signals the agency is actively seeking DEI targets rather than responding to worker grievances. With the EEOC handling more than 88,000 discrimination claims annually, the outcome of the Nike case is being watched closely as a potential precedent for corporate DEI programs nationwide.

Read more via The New York Times, EEOC, Fast Company

Immigration Enforcement Is Reducing Jobs — Not Opening Them Up

A working paper from the National Bureau of Economic Research — described as the first national-level study of its kind examining the labor market effects of the current administration's enforcement push — finds that increased ICE activity is associated with reduced employment among some U.S.-born workers, not improved job prospects. Researchers found a statistically significant negative impact on employment for U.S.-born men with at most a high school education working in sectors like construction.

The mechanism, per the study, involves complementary rather than competing roles: when a construction company loses access to laborers, it builds less — and that reduction in activity translates to fewer openings for electricians, roofers, and other workers who tend to be U.S.-born. Employers are not raising wages to attract domestic replacements; overall demand contracts instead. In areas hit with enforcement surges, employment among likely undocumented workers still in the U.S. fell 4%. Researchers note that the chilling effect under the current administration is larger than in past enforcement periods, in part because of the perceived unpredictability of where and when enforcement will occur, and that the disruptions are showing up in specific sectors and regions but are difficult to detect in aggregate national data.

Read more via Axios, The Washington Post

New Graduates Are Bearing the Brunt of the Labor Market's Slow Burn

The unemployment rate for recent college graduates ages 22 to 27 reached 5.6% in the first quarter of 2026 — above both the 4.2% overall rate and the 3.1% rate for all college-educated workers — according to New York Federal Reserve data. Oxford Economics estimates that 85% of the rise in the unemployment rate since mid-2023 is concentrated in new labor market entrants who cannot find work. Hiring in tech, finance, and professional services remains 20% to 30% below pre-pandemic pace per LinkedIn data. Entry-level hiring fell 6% from December 2025 through February 2026 compared to the same period a year earlier. Mentions of generative AI in full-time job descriptions have increased fivefold since 2023, according to Handshake.

A commentary from Yale's Chief Executive Leadership Institute argues that the debate over AI's workforce impact is being framed incorrectly: the disruption is not showing up as mass layoffs but as a steady contraction of entry-level opportunity, with recent graduates absorbing the impact that existing workers have largely been insulated from. A Stanford study found a 16% decline in early-career employment across the most AI-exposed occupations since late 2022; software development job postings have fallen 53% over the same period, according to Indeed. Companies are not firing at scale — they're getting more output from existing workers and not creating new positions to backfill. Only 10% of employers surveyed said recent graduates are sufficiently prepared for AI-enabled workplaces. The share of U.S. workers who say it's a good time to find a job has fallen from roughly 70% in 2022 to just 28%, with college graduates now more pessimistic than workers without degrees.

Read more via MarketWatch, Yale School of Management

Treating AI Like an Employee Makes Your Managers Worse at Their Jobs

A large-scale experiment published in Harvard Business Review found that anthropomorphizing AI — giving it a name, a job title, or a place on the org chart — produced the opposite of its intended effect. Rather than increasing engagement and trust, framing AI as an employee reduced accountability, increased escalation, and lowered the quality of human oversight. When AI was framed as an employee rather than a tool, personal accountability among managers fell by 9 percentage points, while accountability attributed to the AI rose by 8 points. Managers reviewing work framed as coming from an AI "employee" caught 18% fewer errors than those reviewing the same work framed as output from an AI tool. Requests for additional managerial review jumped 44% under the employee framing — a signal the designation undermines rather than builds reviewer confidence.

Managers at companies framing AI as a teammate were 13% more likely to report uncertainty about their professional identity and 7% more likely to express concern about job security. Critically, the research found that anthropomorphizing AI did not meaningfully increase adoption intent. What drove adoption was managerial encouragement, not how the technology was labeled — a finding with direct implications for how organizations introduce and position AI tools internally.

Read more via Harvard Business Review

AI Is Reshaping Hiring From Both Sides of the Application

74% of companies report that candidates are now using AI in their job searches, while only 18% say they are using AI broadly across their own hiring workflows, according to a survey of more than 400 U.S. talent acquisition leaders by iCIMS and Aptitude Research. 69% of companies report using AI in some capacity in talent acquisition, with screening the most widely adopted use case at 58%, followed by candidate communication (54%), assessments (50%), and sourcing (46%). When AI recommendations conflict with human judgment, recruiters override the AI in 58% of organizations. 82% of companies say transparency and explainability in AI systems are important — yet 45% have no formal AI governance framework in place.

The asymmetry between candidate and employer AI adoption has created a new screening problem employers are calling "skillfishing" — applicants using generative AI tools to fake skills, load resumes with optimized keywords, and game applicant tracking systems. Employers are responding with more rigorous pre-screening, including skills verification questions and situational prompts designed to surface real proficiency early in the process. Some organizations have moved back to requiring in-person interviews as a validation measure; probationary periods and temporary contracts may also make a return, though HR experts caution these should include clear expectations, regular feedback, and support for minor skills gaps to be effective.

Read more via iCIMS, HR Dive

AI Mandates Are Triggering a New Wave of Religious Accommodation Claims

As employers roll out AI use requirements, employment attorneys are warning HR teams to prepare for religious objection claims — an area with limited legal precedent and significant exposure. Religious discrimination claims surged during COVID-era vaccine and mask mandates, and attorneys say AI mandates are now triggering a similar wave. Objections tend to fall into two categories: concerns about AI's environmental impact and concerns about the erosion of human autonomy, particularly with agentic AI. Employees do not need to be members of an organized religion for a claim to be legally valid; courts have consistently declined to challenge the sincerity of stated religious beliefs.

The stakes were raised by the Supreme Court's 2023 Groff v. DeJoy decision, which increased the burden on employers to demonstrate that an accommodation poses genuine undue hardship — defined as "substantial in the overall context of the employer's business." Attorneys advise HR teams to audit accommodation policies now, designate a consistent internal point of contact for incoming requests, and document every step of the evaluation process.

Read more via HR Dive

Three States Are Moving on New Employer Compliance Deadlines

Three states have enacted or are advancing significant new employer requirements on the near-term compliance calendar. Virginia will require pay transparency and ban wage history inquiries starting July 1; employers must disclose salary ranges in all public and internal job postings, with penalties up to $1,000 for a first violation and $5,000 for subsequent ones. Colorado's House passed a bill requiring large employers — those with more than 500 Medicaid-enrolled employees — to offer affordable health coverage or pay a fee to support Medicaid premiums; an estimated 37,200 Medicaid-enrolled Colorado workers are employed by companies subject to the requirement. New Jersey adopted rules codifying the ABC test for determining employee versus independent contractor status, effective October 1, over objections from business groups, gig workers, and freelancers who warned the change would reduce workforce flexibility.

Read more via Morgan Lewis, Colorado House Democrats, New Jersey Monitor

Global Snapshot

Germany's $584 billion infrastructure stimulus, passed last year, remains largely unspent — held up by bureaucratic bottlenecks and cultural resistance to public debt — as business confidence hit a six-year low in April. In Israel, new research from the Taub Center for Social Policy Studies finds AI is changing who becomes unemployed: the share of workers in high AI-exposure occupations among the unemployed climbed from 14–16% in 2019–2022 to 20–25% by 2025. New Zealand's unemployment rate dipped to 5.3% in the first quarter, below expectations, but employment growth, wage increases, and workforce participation all came in below forecasts, with economists expecting the full impact of the Middle East conflict to take another six to twelve months to show up in the data.

Switzerland's Federal Council examined a proposal to tax foreign workers or the employers who hire them, concluding it would face significant legal obstacles and offer no demonstrable economic benefit. In the United Kingdom, median annual pay settlements among major private sector employers held steady at 3.5% in the first quarter of 2026, with the share of firms offering raises of 4% or more rising above 20% — a figure analysts expect to climb further following Britain's 4.1% minimum wage increase that took effect in April.

Read more via The Wall Street Journal, Jerusalem Post, Reuters/MSN, The Local, Reuters

AI Roundup

AI-generated fitness influencers are selling scientifically implausible health transformations on social media. A BBC investigation found misleading fitness ads featuring AI-created characters promising outcomes experts say are impossible — including losing 40 pounds in 28 days — to drive app subscriptions, with many ads failing to disclose that the instructors weren't real. An ABC News investigation separately identified dozens of online retailers using AI-generated images, videos, and fabricated backstories to pose as retiring craftspeople or closing small businesses, then shipping low-quality goods from overseas; experts say the speed at which these operations can be created and shut down makes them difficult to police. A Chinese court ruled that companies cannot terminate workers simply to replace them with AI: the Hangzhou Intermediate People's Court found that a tech firm illegally terminated a quality assurance employee after automating his role, ruling that AI implementation does not meet the legal standard for contract termination — building on a similar decision from December. And Google DeepMind employees in the UK voted to unionize over the company's military AI contracts, citing Google's removal of a pledge not to use AI for weapons development and surveillance, and seeking to block the lab's technology from being used by the U.S. and Israeli militaries.

Read more via BBC, ABC News, Fortune, Wired

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The Need to Know Briefing is published weekly by Kelly, curating the most important workforce and hiring insights for HR leaders and hiring managers.