Jack Dorsey, the former co-founder of Twitter and current CEO of Block, made a dramatic move on Tuesday by firing 4,000 employees — or 40% of the company’s workforce — citing the rapid advancement of artificial intelligence as the primary reason. In a letter to employees, Dorsey stated that the decision was not driven by financial hardship but by the need to adapt to an evolving business landscape.

AI as the Catalyst for Restructuring

“We’re not making this decision because we’re in trouble. Our business is strong,” Dorsey wrote in the letter, which was entirely in lowercase. “Gross profit continues to grow, we continue to serve more and more customers, and profitability is improving. But something has changed.”

That something, Dorsey argued, is the rise of AI. He explained that “the intelligence tools we’re creating and using, paired with smaller and flatter teams, are enabling a new way of working which fundamentally changes what it means to build and run a company. And that’s accelerating rapidly.”

Market Response and Implications for Labor

The market responded positively to the news. Block’s stock rose over 20% at one point following the announcement and opened about 13% higher on Wednesday. The move came at a time when the broader market was experiencing AI-related jitters, with shares of companies like Nvidia performing well despite the uncertainty.

However, the decision has raised concerns about the impact on the labor market. “This is a pretty significant message from a market currently riddled with AI jitters,” said one analyst, noting that the move could signal a broader trend of workforce reduction in the face of AI advancements.

Lee Chong Ming, a former data analyst at Block who was among those laid off, said he could see the effects of AI in his own work. “So much of the data analyst world is finding the right dataset, writing something that will allow you to pull the data set that you want, and then generating output. Every single one of those steps is significantly faster and easier because of AI,” he told Business Insider.

AI’s Impact on Employment and the Economy

According to a Stanford study published in August, AI has already begun to affect the job market, with a 16% decline in employment for workers aged 22 to 25 in industries like customer service and software development. Goldman Sachs’ chief economist Jan Hatzius noted in a report last August that “it is true that AI is starting to show up more clearly in the data.”

Consulting firm Challenger, Gray & Christmas found that AI “was responsible for almost 55,000 layoffs in the U.S. in 2025,” while an MIT study published in November suggested that AI can already replace 11.7% of the labor market.

Despite these findings, the impact of AI on the job market remains a contentious issue. Forrester found that 55% of employers regret laying off staff due to AI, stating that “too often, company management lays off employees based on the future promise of AI.”

“We predict that much of this work will be placed on low-paid workers, either offshore or at lower wages,” Forrester added in its analysis.

The Harvard Business Review surveyed 1,006 global executives in December 2025 and found that “AI is behind at least some layoffs, but that these are almost completely in anticipation of AI’s impact.”

As companies like Block continue to make sweeping changes in response to AI, the implications for the workforce remain uncertain. With the AI revolution still in its early stages, the long-term effects on employment and the economy are yet to be fully realized.