This article first appeared on GuruFocus.

U.S. employers announced the fewest monthly job cuts in two years during July, offering investors a reassuring signal that corporate downsizing is easing even as artificial intelligence continues to reshape technology employment. The data reduces immediate recession concerns, but Friday's official jobs report remains the more important test of labor-market strength.

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Companies disclosed 33,429 planned layoffs in July, down 27% from June and 46% from a year earlier, according to Challenger, Gray & Christmas. Through the first seven months of 2026, announced cuts totaled 477,033, a 41% decline from the same period last year.

The pace of layoffs fell dramatically this summer, said Andy Challenger, chief revenue officer of Challengery, Gray & Christmas. Layoff plans continue to be announced primarily in tech, and artificial intelligence is still the story, as investments in the technology reshape organizations.

Technology companies announced 9,867 cuts during July and 149,023 year to date, up 67% from 2025. AI was cited in 10,970 July layoffs, accounting for roughly one-third of the monthly total and leading all stated reasons for a fifth consecutive month.

Hiring intentions also improved. Employers announced plans to add 16,095 workers, up 47% from June and more than fivefold from July 2025. Year-to-date hiring plans reached 107,500, the strongest January-to-July total since 2023. Aerospace and defense led July hiring, followed by technology and automotive companies.

Still, Challenger data tracks corporate announcements rather than completed layoffs or economywide hiring. June payroll growth had already slowed to 57,000, while unemployment held at 4.2%. Initial jobless claims remained low at 197,000 in late July, suggesting companies are still reluctant to dismiss workers broadly.

Investors should watch the July employment report on August 7, particularly payroll growth, unemployment, wage gains and revisions to prior months. A solid report would reinforce the soft-landing case and support economically sensitive stocks.

Weak hiring despite fewer layoffs, however, would confirm a low-fire, low-hire environment. Continued AI-related cuts could also widen the divide between technology companies benefiting from productivity gains and workers displaced by automation.