A new report may provide an indication of where many talented, laid-off workers may have reestablished themselves.
U.S. employers announced 108,435 job cuts in January, a 118% increase from the same month last year and the highest January total since 2009, according to Challenger, Gray & Christmas. HR Executive wrote about the implications of that data last week.
But there is another dataset that deserves HR leaders’ attention right alongside it: New businesses are forming across the country, and they too are looking for talent.
According to the Registered Agents Inc. (RAI) Business Formation Report released this month, new business formations hit 540,296 in January, holding level with the record-setting January 2025. Forty-five of 51 jurisdictions posted month-over-month gains, with West Virginia up 53%, North Carolina up 52% and Kentucky up 48%.
When job markets tighten, formations surge
Federal data reinforces the tightening labor picture. Job openings fell to 6.5 million in December, continuing a downward trend, according to the February release of Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey.
These numbers are not contradictory. They are complementary. When fewer doors are open, more people build their own.
The RAI report notes a pattern. Business formations tend to rise when job markets contract. The January data bears that out. Even as formations surged nationwide, Challenger data shows employers announced just 5,306 hiring plans in January, the lowest for the month since tracking began in 2009.
For HR leaders, this is a talent pipeline signal. People who would have been candidates six months ago are now filing articles of organization. They are becoming independent contractors and consultants, and they are doing it in volume. That shift has implications for how organizations source talent and how they classify the workers they engage.
The AI narrative is losing credibility
Forrester’s Predictions 2026: The Future of Work report identifies a trend it calls “AI washing,” where companies attribute financially motivated cuts to future AI implementation without having mature AI applications ready to fill those roles.
A Resume.org survey of 1,000 U.S. hiring managers, released in January, puts a number on it: Fifty-nine percent of companies admit they emphasize AI’s role when explaining layoffs or hiring freezes because it resonates better with stakeholders than citing financial constraints. Only 9% say AI has fully replaced certain roles.
Forrester predicts half of AI-attributed layoffs will be quietly reversed, with jobs returning offshore or at lower salaries. The firm reports that 55% of employers already regret AI-attributed cuts.
As HR Executive reported recently, reversals create deepening trust problem. When AI is used as a blanket explanation but workloads do not in fact change, employee confidence in leadership erodes. HR leaders who are allowing that narrative gap to persist are borrowing against their employer brand.
Read more: AI will eliminate jobs, but most current layoffs aren’t AI-driven
Regional signals give clues
The national picture is stable, yet the report pulls out a few regional highlights.
Florida led the nation in total business formations throughout 2025, though this may moderate in 2026. In January, the state saw a 36% year-over-year decline, according to the RAI report.
The decline coincides with multiple headwinds. Financial services company Comerica’s 2026 Florida Economic Outlook forecasts slower hiring, rising unemployment and slowing population growth driven by expensive housing, surging insurance premiums and fewer international arrivals under stricter immigration rules.
Other states showed notable year-over-year declines as well. Pennsylvania, Alabama, New Hampshire and Georgia rounded out the top five in the declining new business category.
On the growth side, Texas posted 45,751 formations in January, up 16% year over year, reinforcing its position as a magnet for business activity. Virginia climbed 16% as well. States like Wyoming (up 32% year over year) and Nevada (up 13%) continue to attract entity filings.
For companies with operations, recruiting pipelines or expansion plans tied to specific regions, these are not background numbers. They are leading indicators of where talent markets are tightening, where entrepreneurial activity is pulling workers out of traditional employment and where workforce planning assumptions may need to be recalibrated.
What HR leaders should do with this data
The convergence of record layoffs and record business formations does not appear to be a coincidence. Data suggests these are connected patterns that could touch talent acquisition, workforce classification and internal communications.
Button up contingent workforce classifications
HR leaders should consider auditing contingent workforce strategies. If former employees are forming LLCs, engaging them as contractors may need to account for worker classification compliance. The line between a former employee and an independent contractor carries legal and operational risk.
Wake up to faulty AI narratives
Second, pressure-test the AI narrative at your organization. If the firm is framing cost-driven reductions as AI-driven transformation, the credibility gap will catch up with HR and their cohorts on internal communication teams. Employees are perceptive.
Forrester’s findings can be reckoned as a cautionary signal, warning organizations that rush to automate jobs amid AI hype risk costly course corrections, reputational damage and a decline in employee experience. Forrester’s 2026 Future of Work Predictions add that more than half of AI-related layoffs will later be undone, as companies discover the operational difficulties of replacing human expertise too soon.
Check in with managers across the country
Third, watch regional formation and migration data as leading indicators. Florida’s January drop is one example, but every state tells a workforce story. These datasets, updated monthly, can inform where to recruit, where to expand and where talent markets are changing.
State-level policy movements may also come into play. “A sharp increase or decrease in business creation that coincides with recent policy change can reveal the impact of local regulatory changes and help policymakers assess whether policies drive or hinder economic development,” according to the RAI report.
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