Renowned economist and Former Secretary of Labor, Robert Reich highlighted the role of artificial intelligence (AI) in driving stock market gains while jobs and wages stagnate in the real economy.
“This is the reason the stock market is completely disconnected from the real economy,” Reich wrote on X on Sunday.
Reich shared a video clip from “Coffee Klatch,” where he discusses how AI allows companies to reduce payroll costs, thereby increasing profits and boosting stock market performance, while the average working population loses jobs.
The economist said payroll makes up about two-thirds of corporate costs, so cutting it to around 50% would largely boost profits.
“And so you have profits going up. And as profits go up, the stock market goes up,” explained Reich.
Companies Fire Thousands Amid AI Push
Reich’s comments come in the wake of significant job cuts by tech giants such as Meta and Amazon.com (NASDAQ:AMZN). Meta is planning to lay off 8,000 employees as it shifts focus towards AI. Despite previous layoffs in 2022 and 2023, Meta’s shares have risen by 5.86% since the beginning of the year.
Reports earlier this month suggested that Oracle Corp (NYSE:ORCL) is cutting thousands of jobs despite over $6 billion in profits, as part of its AI push. About 18% of its global workforce was abruptly terminated via early-morning emails with immediate system access cuts. TD Cowen estimated layoffs could total 20,000–30,000, potentially making it 2026's largest tech job cut.
Similarly, in January, Amazon confirmed a reduction of 16,000 jobs as part of an organizational restructuring. The company aims to “strengthen our organization by reducing layers, increasing ownership, and removing bureaucracy,” according to a message shared with employees. Though CEO Andy Jassy stated that the layoffs were not “AI-driven.”
AI Layoffs: Reality Or Corporate Spin?
Goldman Sachs warned workers displaced by AI could face years of lower pay and slower career growth, based on a review of 40 years of labor data. The report found that, like past technological shifts, AI-driven job losses may lead to prolonged financial setbacks and weaker labor market outcomes.
However, Scale AI CEO, Jason Droege said some CEOs are using AI as a cover for planned layoffs, arguing firms are "washing" job cuts with AI claims. He also dismissed fears of an employment "apocalypse," saying AI will boost competitiveness rather than destroy jobs, while warning that workers who fail to adapt to the technology risk losing their livelihoods.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo: Phil Pasquini/Shutterstock
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