Mark Schniepp
December 2025
I have been whining a lot lately about the effect of rapid AI adoption by the business sector on the labor markets, especially in
California this year. The national economy continues to report job gains, while California shows virtually none. We are the tech hub of the nation, and that industry has reported more layoffs than other sectors.
A surge of capital is flowing into AI. Last year, private investment in AI totaled $109 billion in the U.S. with China and the U.K. under $10 billion. This year, AI investment in the U.S. will rise to an estimated $161 billion according to the Stanford Institute for Human-Centered Artificial Intelligence.
While uncertainty this year has been more elevated and has caused delays or postponement in hiring, the principal cause appears to be the advent of practical AI technology that is seemingly replacing workers in many industries.
Through October, there were 160,000 layoffs announced in California, or nearly 25,000 more than in 2024 over the same time period. Both are the most of any state in the U.S.
This year, thousands of workers at Amazon, Intel, Salesforce, Apple, Meta, Paramount, Warner Bros. and Walt Disney Co. have lost their jobs.
The downsizing has contributed to California having the highest unemployment rate in the nation at 5.5 percent in August. Only Washington, D.C. has a higher rate.
And layoffs now appear to be accelerating. According to the most recent Challenger and Gray report, 48,000 layoffs this year have been due to the replacement of workers by AI, and over 30,000 of those were in October alone.
Layoffs in California are heavy in the technology sectors, the film, TV, and sound recording sector (i.e., Hollywood), in finance and in advanced manufacturing which includes aerospace parts, medical devices, and computer components like chips and boards.
The big loser of AI is the younger entry level workforce because AI systems can at least perform many of the tasks that new workers in their freshmen and sophomore years could do.
Aside from tech, AI is also replacing entry level jobs, in finance and professional services. But in Hollywood, workers of all ages have
been laid off or simply not hired because AI is being used to create content, produce realistic video derived from existing film, and generate the attendant sound for scenes, including full soundtracks. AI can create actors, reducing staffing costs and precluding the need for wardrobe, makeup, or training.
Locational settings all over the world (or universe) and large volumes of extras needed to create crowded scenes can now be realistically created by AI.
Runaway production to other states and countries has largely contributed to the lack of new hiring in film and TV, leading to the sale
of Paramount in August, and the now-for-sale status of Warner Bros.
2025 has been the most difficult year since the Great Recession (aside from the pandemic) for any positive job creation in the state, following two sluggish years in 2023 and 2024.
Nevertheless, Moody’s Analytics estimates AI spending this year has added more than half a point to U.S. gross domestic product, much of what you can see in the 2025 quarterly estimates for California. Consequently, we are experiencing what appears to be a jobless economic expansion.
A labor market rebound may be on the horizon
By one estimate, Silicon Valley tech giants will invest more than $400 billion this year in AI data centers, along with electric grid infrastructure. Amazon, which recently announced plans to invest up to $50 billion to expand its AI and supercomputing services for the U.S. government, will break ground on a 1.3 GW facility in 2026. In the short term, jobs will be created to construct and maintain data centers and their attendant infrastructure.
Tech sector employment may ultimately experience a rebound by 2027 with the presumed hiring of thousands of workers to clean up the untidy content of inaccurate images, text, videos and low-quality narratives generated by AI learning models since 2023.
Southern California has a deep history in aerospace and a large, experienced workforce in engineering and manufacturing. As part of a “re-industrialization of the area, private sector expansion of aerospace and other advanced manufacturing is now occurring in Los Angeles and San Diego Counties. El Segundo is becoming a hub for defense and aerospace start-ups. Hadrian Automation is expanding its aerospace component manufacturing facilities creating hundreds of new jobs in Torrance.
Furthermore, venture capital investments in the region more than doubled to $5.8 billion in 2025 Q2 compared with a year earlier. Costa Mesa-based defense tech company Anduril received the most funding, raising $2.5 billion according to research firm CB Insights.
Anduril leased a 190,000 square feet office campus at The Hive in Costa Mesa, and 163,000 square feet of industrial space in Santa Ana, both in September 2025. The facilities are expected to support a rigorous expansion of manufacturing, distribution and R&D operations.
Providing workers can be hired, the construction industry is flush with industrial, warehouse, residential and infrastructure projects. Tourism in California is likely to rebound from the modest downturn in international visitors in 2025, especially if global GDP moves higher as forecast.
Onshoring of manufacturing operations has been a major policy thrust of the Trump Administration though it will predominately 
occur in other states. Nevertheless, California will realize some direct and spinoff effects of an expansion in domestic manufacturing activity especially in the advanced technology and defense products. This should result in new job creation by 2028.
The Olympics are coming to Los Angeles in 2028. The estimated economic impact will be substantial. Current estimates have job creation at 75,000 workers in 2028, with spinoff effects lasting into 2029.
The UCLA Anderson Forecast calls for another stagnant year of job creation in 2026 but a rebound in 2027, with total wage and salary employment rising about two percent if the conditions we’ve described above fall into place.
We cautiously expect a rebound in job creation but not reaching the extent of the average annual numbers recorded in the past. The labor force in the region is not increasing that fast anymore and population will be contracting by the early 2030s.
The California Economic Forecast is an economic consulting firm that produces commentary and analysis on the U.S. and California economies. The firm specializes in economic forecasts and economic impact studies, and is available to make timely, compelling, informative and entertaining economic presentations to large or small groups.
