AI Hype, Job Market Slump, and Whether Software Engineering Faces a Bubble

The IT job market has deteriorated sharply over the past two years, with fewer open roles, harder entry for junior developers, and slower recruiter outreach for experienced engineers. This downturn has coincided with rapid AI adoption in software development, fuelled by tools like GitHub Copilot, Cursor, and large language models such as GPT-4 and Claude 3. Major tech companies have begun integrating AI agents into engineering workflows and, in some cases, reducing headcount alongside these deployments. However, analysts and engineers increasingly argue that the causes of the slowdown are multiple and overlapping, not solely attributable to AI. Growing scrutiny of AI's actual productivity gains and return on investment has led some observers to question whether the industry is heading into another speculative bubble.