Large companies are returning to hiring, contrary to predictions that artificial intelligence would eliminate jobs

It turns out that large companies in the US may need additional employees after all.

For months, large employers treated hiring as a last and expensive resort. Now, a turnaround is emerging in a variety of sectors. Companies, from railroad giant CSX to Alphabet, the parent company of Google, have told investors in recent days that they intend to hire employees to meet their growth targets or to take advantage of emerging technologies.

The move to increase headcount, even if moderate, marks a change from the message that characterized many companies throughout most of the AI era. Large employers mostly avoided hiring new employees due to economic uncertainty or the belief that AI could perform a larger portion of workplace tasks. However, there are now managers who believe that the costs and limitations of AI require hiring additional employees, and others are seeking to re-hire staff following rounds of layoffs.

"We actually need to accelerate hiring a little bit. We are currently a little behind," Booz Allen Hamilton COO Kristin Martin Anderson told investors. "We are addressing that now." The government contracting firm laid off thousands of employees last year after the Trump administration cut federal contracts and demanded that companies justify the costs they charge.

As of June 30, the company employed about 30,900 people, a 7.5% decrease from the year before. However, it is now seeing healthy demand for its services, including in the national security sector, where employees with security clearances are required.

Demand for entry-level roles

For most of the last 18 months, large employers were convinced that fewer employees meant faster growth. Public companies in the US reduced the number of employees in office roles. Now, the volume of layoffs is also shrinking. The number of new unemployment claims in the US in the last week was the lowest recorded since 1969, according to federal government data.

Part of the change in hiring policy also reflects a reassessment by employers regarding the capabilities of AI, said Sarah Franklin, CEO of the HR platform Lattice. Many companies stopped hiring for entry-level roles, thinking that AI agents could fill the gap. Since then, they have realized that humans are needed to work alongside AI.

"Just because there are AI agents for coding doesn't mean you stop hiring engineers," Franklin said, adding that companies using AI agents for sales still need salespeople.

Among Lattice's thousands of clients, many companies have now returned to hiring for a variety of roles, especially entry-level positions.

"There is huge demand for this," notes Franklin. "What we are seeing now is the realization that skills suitable for the AI era are required. You need this workforce that is at the beginning of its path, brings innovative thinking, and hasn't yet become set in patterns of thought. In addition, it is also more cost-effective for employers because these are employees who are relatively new to the labor market."

The increase in hiring pace is not limited to office jobs. Tool manufacturer Snap-on said it intends to hire to expand its operations. Railroad company CSX said the number of employees in train and locomotive operation roles is expected to "grow moderately" in the coming months to help it meet rising demand, even as it continues to rely on technology to compensate for attrition in other areas of the company. However, the transportation company noted that its headcount is still lower than it was a year ago.

Few companies are declaring that they plan to embark on a large-scale hiring spree, and even those that are hiring clarify that they are looking for specific types of employees.

Tech giant Alphabet is expected to continue hiring in key investment areas like AI and cloud computing, said CFO Anat Ashkenazi. Software company ServiceNow is looking to hire additional field sales staff to support growth in areas like cybersecurity.

M. Keith Waddell, CEO of staffing firm Robert Half, said the impact of AI on the labor market is proving to be "more moderate than some feared." The company places employees in roles across various sectors, from technology to financial services, and some of its clients have recently returned to hiring.

"Demand for hiring continues to improve, and market conditions are increasingly supportive of our activity," he said.

Where do we go from here?

However, some warn that there is still more unknown than known, as the true potential of AI continues to evolve. "Will we need more employees? Will we need fewer employees?" wondered Paul Osterman, professor emeritus at MIT and author of the new book 'Disposable Workers' which deals with changes in the world of employment. "We have no idea. Nobody has any idea."

According to Osterman, many companies treated their employees as a replaceable resource, firing them when it suited them or moving them to contractor or part-time status. He estimates that this trend will continue in the current period of uncertainty.

"AI creates a lot of uncertainty among employers, who simply don't know yet which employees they need and which they don't," he said. He added that the recurring message that AI will replace employees and save money for shareholders is unlikely to disappear. "And who will be the victim of all this noise?"

This article was translated by Globes exclusively from The Wall Street Journal.