90% of Executives Privately Admit AI Has Had Zero Workforce Impact: So Why Did They Fire 61,000 People for It?

On March 31, 2026, Marc Andreessen, one of the most prominent venture capitalists in Silicon Valley and one of the biggest investors in artificial intelligence, went on a podcast and called the wave of AI-related layoffs a "farce."

His exact words: "AI literally until December was not actually good enough to do any of the jobs that they are actually cutting."

He said most large companies are overstaffed by 25% to 75%, and AI gave them the "silver bullet excuse" to clean house without looking like they were simply cutting costs.

The data supports him. A National Bureau of Economic Research paper found that 90% of executives privately say AI has had zero impact on employment at their companies. Yet AI was cited in 12,304 U.S. job cuts in just the first two months of 2026, and over 61,000 so far this year.

Something does not add up. And understanding the gap between the narrative and the reality matters enormously for anyone running an agency.

The Incentive Structure

The disconnect makes sense when you follow the incentives.

When Block CEO Jack Dorsey announced that 4,000 employees, 40% of his workforce, were being cut due to AI, Block's stock jumped 24% overnight. The market did not just accept the AI narrative. It rewarded it handsomely.

A survey of U.S. hiring managers found that 60% said they emphasise AI's role in reducing hiring because "it is viewed more favourably than financial constraints."

The pattern is clear:

• A company announces layoffs citing AI: stock goes up, CEO looks visionary
• A company announces layoffs citing revenue pressure: stock goes down, CEO looks like they failed

Same layoff. Different narrative. Opposite market reaction.

Amazon CEO Andy Jassy initially cited AI as the reason for workforce reductions, then later clarified the cuts were "not really AI-driven, not right now at least." But by then, the narrative had served its purpose.

A Forrester report from January 2026 put it directly: "Many companies announcing AI-related layoffs do not have mature, vetted AI applications ready to fill those roles."

The SF Standard Investigation

An investigative piece by the SF Standard published on April 2, 2026, examined the gap between AI layoff announcements and actual AI implementation. The findings were striking:

• Companies announcing AI layoffs were, on average, no more advanced in their AI deployment than companies that did not cite AI
• Many of the roles cut were in departments where AI tools had not been meaningfully deployed
• The timing of AI layoff announcements correlated more closely with earnings report cycles than with AI deployment milestones

The conclusion: for a significant number of companies, "AI layoffs" are a branding exercise for cost cuts that would have happened anyway.

What This Means for Agencies

If you run an agency and you have lost a client who said they were "replacing you with AI," it is worth questioning whether that was actually true.

The threat to agencies is real: AI genuinely can handle certain execution tasks that agencies have traditionally billed for. But a significant portion of lost agency contracts are not actually being replaced by AI. They are being cut for budget reasons, with AI serving as the socially acceptable justification.

The client who says "we are bringing everything in-house with AI" may actually mean "our CFO needs to cut costs, and saying AI sounds better than saying we cannot afford you."

The employer who says "AI is handling recruitment now" may actually mean "we have a hiring freeze, and blaming AI means we do not have to admit the business is struggling."

This distinction matters because it changes the response strategy entirely.

Two Different Threats, Two Different Responses

If the threat is real AI replacement: The response is to build capabilities AI cannot replicate. Strategic advisory, cross-platform intelligence, relationship management, system architecture. Move up the value chain from execution to strategy.

If the threat is AI-washing (budget cuts disguised as AI adoption): The response is to make your agency's ROI so measurable and so clearly positive that cutting you is demonstrably a bad financial decision. If your agency generates $5 in revenue for every $1 the client spends, no CFO cuts that, regardless of the AI narrative.

The agencies most at risk are the ones that cannot distinguish between the two, and therefore cannot mount the right defence.

The Boomerang Effect

There is evidence that the AI-washing narrative is already backfiring. Data from early 2026 shows that 55% of companies that conducted AI-related layoffs now regret the decision. Two-thirds are already rehiring. 31% say restaffing cost more than the savings from the cuts.

Klarna, the poster child for AI replacing customer service, has begun quietly rehiring humans after quality collapsed. CEO Sebastian Siemiatkowski admitted: "Cost unfortunately seems to have been a too predominant evaluation factor. What you end up having is lower quality."

For agencies, the boomerang creates an opportunity. Companies that fired their agency and tried to bring everything in-house with AI are discovering that AI handles the simple 80% well but collapses on the complex 20% that actually drives results. These companies will return to agencies, but not to agencies selling the same old execution services. They will return to agencies that can manage the AI-human hybrid workflow.

The Bottom Line

The biggest AI investor in Silicon Valley is calling AI layoffs a farce. Nine out of ten executives privately admit AI has not affected their workforce. The market rewards the narrative regardless of the reality.

For agencies, this means the threat is both real and manufactured simultaneously. Some clients genuinely need less agency support because AI handles their execution. Others are using AI as a convenient excuse to cut budgets.

The agencies that thrive will be the ones that can tell the difference, and build systems that make them indispensable either way.