Gen Z, AI Layoffs, and the Truth About the 2026 Job Market

f you only read headlines, you would think the 2026 job market is a no‑win game.

Nearly 80% of people say they feel unprepared to find a job next year, while two‑thirds of recruiters say it is harder to find quality talent—even as applications per role have doubled since 2022. In my own day job, surveying 1,000 hiring managers, 62% told us that “candidate quality” is still their biggest obstacle.

So which is it? Too many candidates—or not enough good ones? A broken workforce—or a broken process?

In a recent Human Capitalist episode, psychotherapist and Gen Z expert Tess Brigham helped me connect those dots. What started as a conversation about LinkedIn data and AI layoffs turned into a much sharper diagnosis of what is really going on:

• job seekers are rattled by AI narratives

• employers are still hiding bad decisions behind AI

• Gen Z is about to force a different kind of accountability at work

Here is what Tess and I unpacked and what it means if you employ, lead, or are Gen Z.

📺 Watch the full episode here: https://youtu.be/bIXE0quITEc

🎧 Listen to it on your favorite channel: https://www.purpleacornnetwork.com/podcasts/the-human-capitalist

The “talent gap” is as much psychological as it is skills‑based

LinkedIn’s latest research paints a clear picture. Four out of five job seekers feel unprepared to find a job in 2026, and 65% say the search has become more challenging, citing fierce competition and confusion about whether they are even a fit for the roles they see. At the same time, 66% of recruiters say it is harder to find qualified talent, despite a surge in applications.

Tess sees the human side of that split every day. Younger candidates, overwhelmed by AI headlines and economic uncertainty, are oscillating between two extremes:

• blanket‑applying to everything they see, or

• bailing on applications halfway through because they convince themselves they are not qualified.

That aligns with what I am seeing in the data. In some funnels, application drop‑off sits around 60%. One common reason candidates give is simple: they start reading the job description and decide they are not really a fit. That is a sharp contrast from the old recruiter joke—“Did anyone even read this posting?”—and suggests that at least part of the “quality problem” is a matching and confidence problem, not a raw‑skills deficit.

Tess frames this as a psychology issue. When every other article tells you AI is coming for your job, and every layoff story blames AI, it is easy to internalize a belief that you are already obsolete. That does three damaging things at once:

• It drives low‑intent, spray‑and‑pray applications that clog pipelines.

• It scares away genuinely qualified candidates who talk themselves out of applying.

• It deepens a sense of hopelessness that makes targeted, thoughtful searches feel pointless.

In other words, recruiters are not necessarily seeing a less talented workforce. They are seeing a more anxious, less focused one.

AI layoffs are the perfect scapegoat—and Gen Z is not buying it

We then shifted to a headline that has been bothering me for months: “AI layoffs.”

Yes, AI is changing how work gets done. But a lot of what is being labeled “AI‑related” looks suspiciously like something else: over‑hiring during the 2021–2022 boom, followed by painful corrections in 2023–2025.

That is exactly why the bipartisan AI‑Related Job Impacts Clarity Act caught my eye. The bill would require large companies and federal agencies to submit quarterly reports to the Department of Labor detailing layoffs, unfilled roles, and retraining tied specifically to AI. The goal is simple: separate hype from reality and give the public a clearer picture of what AI is actually doing to jobs.

Be sure to check out: AI Jobs Clarity Act Breakdown: https://youtu.be/tH_OhrxPrY4

Tess’s take was blunt: AI has become a convenient story for leadership to sell to investors. Saying “we are cutting jobs because of AI” sounds innovative. Saying “we over‑hired and mismanaged costs” does not. AI becomes a shield from accountability.

The real problem with that narrative is not just accuracy. It is what it does to the people listening, especially early‑career workers.

Gen Z is stepping into the workforce under a constant drumbeat of “AI is taking all the jobs.” Yet when you drill into the numbers, the actual share of layoffs explicitly attributed to AI is still small, often in the low single digits in broader analyses. Many companies are not replacing humans one‑for‑one with software. They are redirecting headcount that would have been opened into AI infrastructure and product work instead.

That nuance never makes the headline. The result is an “AI monster” in the minds of new grads: big, amorphous, and terrifying.

Gen Z is not passively accepting that story. They are skeptical by necessity. This is the first generation to grow up fact‑checking whether a video is AI‑generated, parsing influencer content for hidden sponsorships, and constantly asking, “Is this real?” That same skepticism now shows up in how they interpret corporate AI claims and how they approach their own careers.

For leaders, that means two things:

• You cannot keep hiding poor decisions behind AI. Someone is always watching—and this generation is willing to walk.

• You need to talk about AI like you talk about the internet: a permanent part of the landscape, with pros, cons, and a need for real skill‑building, not fear‑mongering.

Gen Z is wise, skeptical, and done with “because that’s how we’ve always done it”

Tess has had a front‑row seat to how Gen Z thinks. As a therapist and coach, she started with millennials a decade ago and watched their struggles through the 2008 crash and the pandemic. Then she watched Gen Z watch them.

Her view: Gen Z learned two big lessons from what they saw:

1. Blind loyalty to a company does not guarantee security.

2. “Keep your head down and wait your turn” is not a viable strategy in a world that keeps lurching from crisis to crisis.

That is why they are more skeptical of AI than you might expect from a “digital native” generation, and why they are so clear about what they want from work. Surveys show that Gen Z ranks mental health and work‑life balance near the top of their priorities, and 61% say they would seriously consider leaving a job for significantly better mental‑health benefits elsewhere.

From Tess’s vantage point, Gen Z also brings three strengths that older leaders underestimate:

• Reflection. They have been taught to name emotions, question assumptions, and think about what they actually want—skills many Gen Xers and boomers had to learn later, if at all.

• Perspective. They grew up watching older millennials get whiplashed by economic shocks. They are determined not to repeat those mistakes, even if it means being labeled “demanding.”

• Boundaries. When a workplace repeatedly dismisses their questions or needs, they are far more willing to go “no contact”—with bosses, brands, and even family—than previous generations.

This is where the leadership discomfort kicks in.

Gen X and older leaders were raised on a script: keep quiet, work hard, and you will be rewarded eventually. Many still carry a reflexive “in my day” mindset into performance conversations. So when a 24‑year‑old asks, “What would it take to be promoted in two years?” they hear entitlement, not engagement.

Tess argues that this is a missed opportunity. Curious, direct questions from younger employees are not insubordination; they are data. C‑suite leaders she has seen thrive with millennials and Gen Z are the ones who:

• drop the need to be constantly flattered

• invite hard questions about how decisions get made

• treat generational friction as a design problem, not a character flaw

In other words: empathy is not a nice‑to‑have. It is a core leadership competency in a workforce where Gen Z will soon be the largest cohort.

If you lead Gen Z (or are Gen Z), here is what to do next

We closed the episode by flipping the script: advice for organizations, and advice for Gen Z.

For leaders and HR teams, Tess’s message was clear:

• Start with your own attitude. If you walk into every interaction thinking “these kids are the problem,” no program will fix your culture.

• Stop romanticizing your era. “In my day” stories do not land as wisdom; they land as dismissal.

• Align pay and benefits with reality. When housing, healthcare, and basic living costs are out of reach, telling young employees to “pay their dues” without a credible path forward is not sustainable.

• Invest in mental health and development. Gen Z expects real support—therapists, coaches, learning paths—not just pizza Fridays and vague talk about “well‑being”.

• Explain the why. Millennials wanted it and often got shut down. Gen Z will simply leave if you do not provide it.

For Gen Z, her advice was just as direct:

• Ignore the doom loop. The job hunt is hard, but people are still getting hired. Headlines are not your operating manual.

• Get targeted. Spraying a thousand resumes is not a strategy. Pick lanes that interest you, even if you are not sure they are forever, and go deep.

• Use your network. Parents, professors, former managers, friends of friends—anyone who will take a call. Ask, “What do you actually do all day?” and “What do you wish you had known before you started?”

• Take action, then adjust. You will not get clarity sitting still. You will learn more from six months in a job you are not sure about than from six months of overthinking.

One thing I added is this: those conversations are almost always mutually beneficial. When a Gen Z candidate asks me why I do something a certain way, I sometimes catch myself thinking, “Why do I?” That kind of honest question is a gift.

Tess ended with a point that applies to every generation:

Almost no one ends up doing exactly what they thought they would at 22. The job you are in, the niche you occupy—chances are, you did not have language for it when you picked your major. What truly fits you gets unearthed over time. Your job is not to predict it perfectly. Your job is to stay curious and flexible enough to recognize it when you stumble into it.

If you employ Gen Z, they are already telling you what they need: fairness, clarity, mental health support, and leaders who are willing to look in the mirror.

If you are Gen Z, your skepticism, your questions, and your boundaries are not bugs in the system. They are the upgrades the rest of us should have installed years ago.

• 🎧 Available on Spotify, Apple Podcasts, and all major platforms.

• 📲 Connect with me on LinkedIn: www.linkedin.com/in/trentcotton

• 📲 Follow Tess Bringham: www.linkedin.com/in/tessbrigham/

📺 Other videos mentioned in the episode:

• AI Jobs Clarity Act Breakdown: https://youtu.be/tH_OhrxPrY4

• Trade Jobs are Making a Comeback: https://youtu.be/y3BR5R6SI_o

• HR Trends-Buzzworthy or BS with Matt Charney: https://youtu.be/d_tfr3gJWKs