Companies cut young worker hiring as AI spreads, Stanford study finds

Artificial intelligence is reshaping the U.S. labor market mainly by slowing the hiring of young workers rather than by firing them. Stanford economists Erik Brynjolfsson, Bharat Chandar and Ruyu Chen, using ADP payroll data, found that as of June, employment among 22- to 25-year-olds in the most AI-exposed occupations was about 19% below where it would have been had it kept pace with young workers in less-exposed jobs. A year earlier, that gap was 15%.

The researchers concluded that the adjustment happens « primarily through reduced hiring of young workers rather than increased separations ». In other words, companies are largely not replacing departing junior staff, and they are citing efficiency as the reason. The pattern shows up against a broader backdrop of layoffs. Through September, U.S. employers announced 573,195 job cuts, according to outplacement firm Challenger, Gray & Christmas. Artificial intelligence was cited in 120,136 of them, more than any other reason this year. Tech companies alone announced 165,925 cuts, up 54% from the same period last year.

Total announced cuts are down 39% from the first nine months of 2025, and AI was cited in only about 9% of September’s cuts. The more consequential effect, according to the Stanford data, is the quieter one: fewer entry-level openings in the occupations most exposed to automation.

The labor picture sits alongside a mixed economic one. Real gross domestic product grew at a 3.4% annual rate in the third quarter, up from 2.2% in the second, according to the Bureau of Economic Analysis. Spending on computer equipment was a main driver of that growth. For many households, however, conditions look different. Consumer prices rose 3.7% in the year through September, and gasoline rose about 34%. The World Bank has described the oil market disruption following the closure of the Strait of Hormuz in March as « the largest oil market shock in history ».

Health costs are also rising. According to KFF, workers now pay an average of $7,471 a year toward family health coverage, up 9% from 2025. Over roughly the same period, wages increased 3.7%, meaning that for many workers real pay has fallen.

The AI buildout is also competing with households for electricity. In PJM, the largest U.S. grid operator, the independent market monitor estimated that data centers caused 63% of the price increase in 2025/2026, about $9.3 billion in costs, according to the Institute for Energy Economics and Financial Analysis. Pepco residential customers in Washington, D.C., saw bills rise about $21 a month starting in June 2025, with roughly $10 of that attributed to capacity prices.

The same technology is being tested on infrastructure problems. The American Society of Civil Engineers estimates that a water main breaks every two minutes in the U.S., and about 6 billion gallons of treated water is lost daily. In the U.K., Northumbrian Water reported in June that a six-month trial of AI-powered acoustic sensors to locate hidden leaks was saving nearly 6.4 million liters of water a day. San Jose Water installed 13,600 fixed acoustic sensors across its 2,400-mile network, which found 483 leaks and saved more than 400 million gallons of treated water. New Mexico’s LeakTracer satellite-plus-AI program identified 216 leaks across 181 miles of pipe in its first year; completing the needed repairs could recover 328 million gallons and save about $505,000 a year.

Policy responses are emerging on the energy side. New Jersey’s Data Center Fair Share Act, signed in July 2026, creates a separate rate class for large data centers, requires them to cover their own infrastructure costs, and demands financial guarantees covering at least 85% of requested load for 10 years. AEP Ohio already requires new data-center customers to reimburse 100% of buildout costs if they cancel before energization. Oregon capped in-network hospital payments at twice Medicare’s rates and saved an estimated $107.5 million over 27 months, an example cited in the broader argument for targeting health costs directly.

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Delaney Sawyer

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Delaney Sawyer covers public affairs, politics, business, culture and daily news for Core Memo. The role focuses on verification, context, and clear explanations for readers.

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