Are a recent hiring freeze and AI gaining ground related?

A regional war sent UAE employers into a hiring freeze, and AI has given them enough reasons to not unfreeze it anytime soon. Even as headline PMI surged to 55.3 in August — its highest level since December 2024 — private-sector employment dropped for the second time in three months.

A change in tack: On the heels of war-related caution and automation tools taking up routine workflows, more and more employers are choosing not to backfill departures, fundamentally severing the link between revenue growth and headcount.

REMEMBER- Hiring activity in the UAE had dropped 4% q-o-q in 2Q 2026, the sharpest fall in staffing levels since August 2020.

“Clients are hiring fewer, more senior people,” Rami Naim, CEO of Guildhall tells EnterpriseAM. From late February the war froze decisions, and the effect showed in the executive search firm’s 3Q billing: placement volumes dipped over 50% q-o-q while fee value hiked 16%.

REMEMBER- Hiring activity in the UAE had tanked 4% q-o-q in 2Q 2026, the sharpest fall in staffing levels since August 2020. At the time, analysts told us a shock in confidence due to the war was a major contributor to the hiring dip.

Blame war, not AI: “The drop in hiring numbers was entirely driven by the conflict, not AI,” Cooper Fitch CEO Trefor Murphy tells EnterpriseAM. AI only helps with individual efficiencies, and is not currently synced up to run no-people processes, he says. Companies were hiring 1.7-1.8 people for every employee who left before the conflict, but that ratio has since moved closer to one-for-one, Talal Bayaa, CEO of HR and finance automation platform Bayzat tells us.

“We saw a lot of unpaid leave being given. So till today we haven’t seen mass layoffs happen,” according to Bayaa. There is a post-Covid lesson here: companies found rehiring “very painful and very costly. So they would rather just put one on unpaid leave and ride it through,” he explains.

It’s a different story for AI-related jobs: The UAE is among the world’s fastest-growing AI talent markets where AI-related job postings tripled from 1% in 2021 to 3.2% in 2025, according to PwC. At the same time, organizations anticipating AI-related job reductions dropped from 34% in 2026 to 13% in 2027, as per a Cooper Fitch report (pdf).

So far, the roles that have thinned out were mostly entry-level: including those who gathered, formatted or moved information including junior analysts, researchers, copywriters, coordinators and some first-line operations roles, both Murphy and Naim affirm.

But AI is changing what happens next: Companies are asking whether every worker, including expats who left during the war, need replacing. “What clients rarely say out loud is that a deferred junior role often isn't coming back. It gets absorbed by existing staff plus tools,” says Naim.

When corporates couldn’t hire, many found they could automate. For Nuwa Capital, this was the back office on the investor side: diligence questionnaires and investor documentation work, which are often repetitive and rule-based tasks. “Our rule is to automate where AI being wrong is cheap, and keep people where being wrong is expensive,” says Arnav Danthi, partner at Nuwa. AI has ramped up the design and production layer of personal training and fitness platform, Enhance, CEO Tarek Mounir tells us. It analyzes large-scale behavioural data to spot client engagement patterns as well as automated the trainers’ administrative work.

For SMEs, AI offers a way to grow without adding overhead: SMEs account for 59% of UAE business’ AI spending — prioritizing automation in sales, lead follow-up, operations, and administration, with finance and invoicing next as e-invoicing requirements take effect, according to Lisa Knight, CEO of Bainna AI Solutions. “With budgets tight, owners want the next salary to go to someone who earns or serves customers.”

The career ladder is suffering: While automation’s impact on senior-level executive recruitment is extremely limited, “AI is taking away the entry-level grunt work which helps young graduates develop the critical thinking needed to evaluate AI outputs,” argues Murphy of Cooper Fitch. At junior and mid-level, companies are expecting the same output from fewer people.

A premium on human judgement: Clients have “stopped paying for volume and started paying for judgement,” says Naim. It’s a similar situation at Enhance, with Mounir telling us “[w]e place increased premiums on critical thinking, emotional intelligence, and the ability to interpret insights to build stronger relationships.”

But, AI is not producing one uniform employment outcome. Some employers are embedding AI and automation skills into existing roles. At Bayzat, employees whose work once centred on finance data entry are now managing AI agents to evaluate their output.

For others, the focus is working with the machine: Nuwa’s Arnav says the investment firm has not cut planned roles; instead, AI has raised the amount of work its existing team can handle. Enhance similarly says AI allows its workforce to absorb greater volumes without reducing its commitment to hiring.

The crucial question is what happens when the war-related hiring freeze lifts. “At senior level, permanent hiring is recovering fastest. Clients want committed leaders in seat before 1Q 2027,” Naim predicts, adding that junior and mid-level process-heavy positions remain under pressure. Outright AI-related job reduction expectations have fallen sharply, even as organizations continue exploring role consolidation, according to Murphy.

Bayaa also cautions against attributing too much of the current employment picture to AI: only a small minority of companies are using AI deeply across day-to-day operations with a defined company-wide strategy.

That leaves the UAE’s employment market at a critical juncture. The war may explain why companies are not hiring today, and AI could determine how many people they need when they start hiring again. As Naim puts it, “The war cost the market about two quarters. AI is changing what a team of ten looks like for the next 10 years.”