Disentangling Tech Hiring Headwinds: Higher Rates, Overhiring, and AI

Research evidence excerpt

Disentangling Tech Hiring Headwinds: Higher Rates, Overhiring, and AI

Economics Research

2 July 2026 | 1:22AM EDT

GLOBAL ECONOMICS ANALYST

n Three labor market headwinds—a hawkish Fed pivot that slowed growth and Joseph Briggs

+1(212)902-2163 |

raised rates, AI efficiency gains, and a correction for pandemic-era overhiring— joseph.briggs@gs.com

Goldman Sachs & Co. LLC

have plausibly contributed to a weaker tech labor market since 2022.

Sarah Dong

Disentangling the role of each is complicated, and some commentators have +1(212)357-9741 | sarah.dong@gs.com

suggested that companies are “AI-washing” layoffs by falsely attributing them to

AI efficiencies. In this Global Economics Analyst, we leverage detailed

company/occupation-level employment data to quantify the contribution of

each headwind since 2022.

n First, we find little evidence that higher interest rates have driven the slowdown

in tech hiring. Hiring trends are virtually identical across tech companies that

were more and less exposed to higher rates.

n Second, we find that AI has slowed hiring, but its impact is small. Differences in

occupational AI exposure explain around ½pp of the slowdown in annual tech

employment growth since 2022. We also find that AI-layoff announcements

appear credible, as companies that announced AI-related layoffs lowered

headcount in AI-related occupations more than companies that cited other

reasons for layoffs.

n Third, we find stronger evidence that hiring has underperformed among

companies that overhired between 2020-2022. Statistical estimates that

account for both company and occupational hiring trends suggest that

headcount normalization can explain up to 2pp of the slowdown in annual tech

employment growth since 2022.