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Bad news for college grads: These 3 economic factors are creating a dismal jobs market for entry-level workers
A new class of young graduates is getting ready to enter the workforce this summer, but they’re likely to face a chilly reception.
In one social media post after another, entry-level workers are bemoaning the state of the labor market and how hard it is to find a job. “It feels more likely to win the lottery right now than get a job,” said one young TikTok poster. “This is not what I expected,” said another young woman on Instagram as she held a stack of resumes and wiped tears from her eyes. “But I can’t be delusional anymore, I literally need to make money.”
The current labor market appears strong on the surface—unemployment is still low at 4.2%, wage growth is steady, and the U.S. added 139,000 jobs in May. But those numbers don’t tell the whole story. A deeper look beneath the surface reveals a much different jobs market for entry-level workers. The unemployment rate for recent college graduates aged 22-27 was 5.8% as of March, according to research from the Federal Reserve Bank of New York. And a May report from Oxford Economics found that 85% of unemployment since the middle of 2023 could be attributed to people just entering the workforce.
“Top-line job openings and unemployment statistics aren’t, in practice, reflecting the experience of new grads entering the workforce,” Mischa Fisher, an economist at Udemy, a provider of online training courses, tells Fortune. “Because entry-level roles are in short supply.”
It’s no surprise, then, that employee confidence amongst entry-level workers just hit an all-time low, according to a recent report from Glassdoor. And more than half (56%) of this year’s college graduates feel pessimistic about starting their careers in the current economy, according to another survey from jobs platform Handshake.
A few different factors are likely contributing to such a tough job market for young people right now. Experts tell Fortune that a combination of factors including a cooling labor market, a hiring pullback prompted by shifting tariff policies, and the long-promised of integration of AI into the workforce, are all creating massive problems for a new generation of job seekers.
“There are now clear trends in the data, not just vague whisperings, that more and more people are getting left behind,” says Cory Stahle, an economist at hiring platform Indeed’s Hiring Lab.
The ‘lock-in’ effect
The COVID pandemic kicked off a major workforce reshuffling, unofficially dubbed the “Great Resignation,” during which workers were successfully able to switch jobs for higher wages.
But that era is long gone. The labor market has become more stagnant, and quit rates fell from 3% in March of 2022, the highest in over two decades, to around 2% as of April 2025, according to data from the Federal Reserve Bank of St. Louis. Workers who switch roles are also less likely to make more money if they do so. People who stay in their jobs are seeing an average of 4.4% wage growth, while those who leave are getting just 4.3% more, according to data from the Bureau of Labor Statistics.
That lack of turnover means that there are fewer opportunities for entry level workers to nab a role. “We’re seeing the labor market’s version of the housing market’s ‘lock-in’ effect, where employees are too nervous to make moves,” says Fisher. “This freeze is blocking normal opportunity flow, so early career workers can’t break in, experienced workers can’t move up, and burned-out employees are staying put.”
Tariff uncertainty
Trump’s tariff policy changes, and their subsequent impact on the economy, is also creating problems for entry-level workers in the labor market.
With an uncertain economic outlook thanks to on-again-off-again levies for major U.S. trading partners, many companies have pulled back on hiring until they get further clarity on what kind of economy will take shape in 2025.
Around 30% of small and mid-size business owners say tariffs are directly impacting their organizations in a negative way, and 42% say they plan to pull back on hiring as a result, according to a May survey from coaching and advisory firm Vistage, in partnership with the Wall Street Journal.
“Business leaders are uncertain and when that happens they don’t do as much hiring because they don’t know what the next week is going to look like, let alone the next month,” says Allison Shrivastava, a labor economist also at Indeed’s Hiring Lab. “They’re going to wait, especially for those jobs in what we think of as, traditionally, white collar sectors, which are often difficult and costly to hire for.”
The new AI reality
The promise of AI has been a looming threat to human workers for years, but there are now signs that companies are using the new tech to take over work previously done by entry-level employees.
Many of the tasks that used to serve as a training ground for junior employees, like data entry, research, and handling basic customer or employee requests, are already being delegated to AI. Technical fields like computer science and finance are getting hit especially hard. While employment for people older than 27 in computer science and mathematical occupations has grown a modest 0.8% since 2022, employment for those aged 22-27, or recent graduates, has declined by 8%, according to a May report from labor market research firm Oxford Economics. That’s compared to college graduates in all other occupations, who saw 2% employment gains.
“We concluded that a high adoption rate by information companies along with the sheer employment declines in these roles since 2022 suggested some displacement effect from AI,” the report reads.
LinkedIn’s chief economic opportunity officer Aneesh Raman, echoed that thought in a recent New York Times op-ed. “In tech, advanced coding tools are creeping into the tasks of writing simple code and debugging—the ways junior developers gain experience,” he wrote.
Companies are under pressure from investors to show that they can do more with less because of AI, says Sam Kuhn, an economist at Appcast, a job advertising company. Cutting jobs, or freezing hiring, are ways to do that. “We are starting to see the ripple effects of companies that have invested a lot of money into artificial intelligence, wanting to show that they’re actually getting something out of it,” he says.
Meta reportedly plans to use AI to review the platform’s privacy and societal risks instead of human staffers. At Microsoft, CEO Satya Nadella said in April that around 30% of code is now written by AI, a reality that likely factored into recent layoffs. And the CEO of payments platform Klarna has openly admitted last month that AI helped the company cut its workforce by around 40%. AI company founders are also getting more candid; Dario Amondei, the CEO of leading AI company Anthropic, has said outright that the technology could wipe out roughly 50% of all entry-level white-collar jobs.
“It sounds crazy, and people just don’t believe it,” he said. “We, as the producers of this technology, have a duty and an obligation to be honest about what is coming.”
What’s a new grad to do?
New job seekers can comfort themselves with the knowledge that it’s not just their imagination—the hiring landscape really is tougher for them than it was a few years ago.
That means they need to be more resourceful than their predecessors when it comes to outsmarting the labor market. That might include things like pivoting their job search to consider other industries or roles outside of what they studied in school. They also need to work harder to show employers that the skills they learned in college are a perfect fit for a given role.
“In the current labor market, new graduates need to find additional signals of skill beyond just a degree,” says Fisher. “From certificates to demonstrated soft skills like communication, the candidates who stand out show they’re already bridging the gap between school and skills acquisition.”
Because the hiring process skews towards Zoom interviews and AI-driven recruiting, young people also need to take the initiative and reach out to hiring managers on their own, whether that’s on LinkedIn, at a local job fair, or tapping into an alumni network. “There are fewer opportunities now to engage on a human level with employers up front,” says Steve Rakas, executive director of the Masters Career Center at Carnegie Mellon’s Tepper School of Business.
There remains, however, a reason for young people to hold out hope. Labor market trends are cyclical, and there are still opportunities out there for young people who want them, notes Rakas—even if they’re not ideal.
“We’re coaching them to think about not just plan A, but also plan B, C and D,” he says.
“To be pragmatic, and also to pivot.”
This story was originally featured on Fortune.com
