The US jobs market is showing signs of a ‘he-cession’

Despite all the drama about the weakening jobs numbers, the US labor market is actually doing OK. There is one major exception, however: if you happen to be a young man.

While the overall unemployment rate was still a respectable 4.2% in July, for young men aged 20 to 24, it was 8.3%, which is near recession levels — and for recent college graduates, the annual rate is 5.3%. Both of these numbers are about double the comparable figures for young women. During the pandemic, the economy was so bad for working women that it inspired the term “she-cession.” Could the US now be headed for a “he-cession”?

Men have dominated the labor market for most of the modern era, and still earn more than women, but the jobs market has not been kind to men for the last few decades. Many men, even in the prime of their lives, aren’t working. And going to college is no longer an automatic way to improve your job prospects.

The question is whether the recent decline in male employment is due to a blip in the business cycle, or represents a structural change in the economy. If the former, this weakening may well recover in the next boom. If the latter — if the labor market is not demanding male skills like it used to, perhaps because of AI or because most job growth is in female-dominated industries — then this trend of men not working will get much worse.

To be sure, part of the explanation is cyclical. The job market is weakening, which tends to affect men and young people first. Men tend to work in jobs more sensitive to the business cycle, such as construction or manufacturing, while women work in more impervious sectors such as health care or education. Younger workers also tend to be the first laid off (or not hired at all) when the economy starts to turn.

But the data suggest that something deeper is happening. The unemployment rate for recent male college graduates who work in retail is at 8.2%, for example, and is just 4.7% for women. Most of the unemployment is among those who work in department stores or restaurants. Meanwhile, unemployment rates remain low for men in manufacturing (under 4%) and elevated but not recession-level in construction (6%).

What’s going on? Hiring is down, and it could be that college-educated men, having a hard time getting a job in their chosen field, are turning to restaurant and hospitality work. But they’re having no luck — because restaurants, bars and retail stores went on a hiring spree just after the pandemic, and they still don’t need many new workers. If this hypothesis is true, it would explain why male college-educated unemployment is showing up in hospitality services and not elsewhere.

As for AI, so far there isn’t much evidence that it is impinging on the job market. If it were, there would be big unemployment numbers in sectors where AI is expected to replace workers. While those figures have increased, they haven’t risen to recession levels.

The unemployment rate for young college graduates (of both genders) in computer and data processing services, for example, is now more than 5%, up from 1.7% in 2019. In finance and other business services, the comparable figures are 3.4% and 2.3%. Other than these fields, there still seem to be a lot of entry-level jobs in corporate America — just a bit fewer than before.

There are still reasons to worry, especially if the economy weakens and corporate America decides to tighten its belt. Then the easiest way for it to save money will be to use AI to replace entry-level hires. And that’s where the real danger lies, at least for recent college graduates: If managers become accustomed to asking a bot instead of an analyst to make a slide deck, then the cyclical can become structural.