New York – When to block
Almost half of the employees were fired
This week, co-founder Jack Dorsey offered a deceptively simple explanation. Thanks to artificial intelligence, companies can do more with fewer employees.
But the announcement placed it at the center of a complex debate over AI and the future of work. On the one hand, there is the genuine fear that technology will take away jobs at an unprecedented pace, and on the other hand, there is the genuine fear that technology will take away jobs at an unprecedented pace. On the other, there’s a deep irony in how companies are playing on that fear and disguising old-fashioned cost-cutting as technological futurism.
The prospect of companies firing employees and investors and using AI as a shiny excuse for ugly layoffs has become widespread enough to earn the nickname “AI laundering.”
Block’s recent history suggests that the adoption of AI is not the only factor influencing staffing decisions. The company hired a large number of employees during and after the pandemic, more than tripling its employee base between 2019 and 2022, but it has been slower to downsize than its peers. The company’s stock price has fallen about 40% since the beginning of 2025, but this decline had nothing to do with AI or anything to do with a business spiraling out of control.
“When you look at the overall workforce, this is less an AI issue and more a problem of businesses continuing to grow in size over a long period of time,” said Zachary Gunn, a senior analyst at Financial Technology Partners, an investment bank specializing in fintech.
While companies want to show investors that they are embracing new technology, workplace automation experts say AI tools have not gone far enough to cause significant cuts to the labor market.
A memo released by Goldman Sachs on February 27 argues that concerns about the impending AI employment apocalypse are “overdone.” Economists at the bank estimate that sectors such as technology that are affected by AI are wiping out just 5,000 to 10,000 jobs per month from overall U.S. payroll growth. Goldman expects the unemployment rate to rise by 0.5 percentage points as adoption increases.
European Central Bank President Christine Lagarde told lawmakers in Brussels this week that ECB economists are monitoring signs that AI is causing job losses, but “we have not yet seen” the “worried wave of job cuts”.
When Amazon announced that it would be cutting its workforce across the board in 2025, it went out of its way to say that AI couldn’t explain it. Asked about the layoffs during an October earnings call, Amazon CEO Andy Jassy told analysts that the decision was “not really financially driven, it’s not really AI driven, at least not right now.”
Similar questions have been asked multiple times over the past year, as more and more companies, including Salesforce and HP, cite AI efficiency as a reason for layoffs.
The questions for Mr. Block were particularly pointed. The company’s announcement comes just days after a viral Substack newsletter published by a small company called Citorini Research laid out a nightmare scenario in which mass unemployment caused stock prices to collapse.
The report’s traction is due in no small part to the fact that major AI companies are coming out with new, more powerful models. One of the leading companies, Anthropic, recently released a number of tools that are fundamental to how American companies operate, including financial analysis and legal research. Large language models have proven to be particularly good for coding, and software engineers are among the most vocal proponents of the idea that big changes are coming.
“If you’ve ever used tools like Claude Code or Codex, you can see how small teams can actually ship more product,” said Gad Lebanon, chief economist at The Burning Glass Institute, a labor market research nonprofit that studies the impact of AI on employment.
“The risks to white-collar jobs in the coming years are real, and workers, managers and policy makers should start planning for that world now,” he added.
While such messages may have been wise in the end, they also exacerbated the fears many workers already have about a tough job market. U.S. companies announced more than 108,000 job cuts in January, the most in the first month of the year since 2009, when the country plunged into economic crisis.
A recent survey of global executives published in the Harvard Business Review found that while AI was cited as a reason for some layoffs, those cuts were almost entirely anticipatory, with executives expecting significant efficiency gains that have not yet been realized.
In a letter sent to employees and shared on social media, Dorsey focused less on Block’s jobs that have already been replaced by AI and more on what he expects to happen in the future.
“I had two choices: phase out the cuts over months or years as this change unfolds, or be honest about where we are and act now,” he wrote. “I chose the latter.”
Christina McElheran, an associate professor in the School of Business at the University of Toronto Scarborough, said dramatic organizational restructuring moves may indeed be needed to take advantage of AI.
“Sometimes when you have to make really big changes and you have to get everyone, your employees, your partners, your customers, your market, on board with the new direction, you have to do something really big and irreversible, like burning the ship of lies,” she said.
For Mr. Dorsey, the situation also plays into long-standing concerns about his interest in unproven technology bets and his reputation for struggling with financial discipline. Block has been criticized for directing resources to Bitcoin-related projects at the expense of more proven parts of its business, such as its Cash App and Square retail payments technology. Twitter, another company he co-founded, was famously disbanded when Elon Musk acquired the social media network, immediately cutting 80 percent of its staff.
Wall Street’s reaction to Mr. Dorsey so far should erase any doubts. Investors drove Block’s stock up 15% on February 27 following the layoff announcement. Figuring out how much of that is due to excitement about the company’s AI implementation and how much is due to salary-cut relief may be beside the point in a market where layoffs are often rewarded. bloomberg
