After Canada, now US: College graduates face the toughest job market in decades – what's gone wrong?

When Palwasha Zahid moved from Dallas to a town near Silicon Valley, she felt like she was stepping into the heart of opportunity, with major tech companies like Google, Apple, and Nvidia just a short drive away, while she was pursuing her master’s degree in data analysis, she imagined her career taking off, as per a report.

Instead, even after months since graduating in December, the 25-year-old is still unemployed as she is unable to find a job in the industry she specialised in, according to an AP report. Zahid told AP, “It stings a little bit,” adding “I never imagined it would be this difficult just to get a foot in the door,” as quoted in the report.

But Zahid is not alone, because young Americans graduating from college this spring and summer are entering one of the most difficult times of the job market in over a decade, as reported by AP.


According to the report, among college degree holders aged between 22 to 27, the unemployment rate hit 5.8% in March, which is the highest since 2012, it's been apart from the pandemic year, and noticeably higher than the national unemployment rate of 4.2%, as per the AP report.

What’s even more concerning is that this gap between young graduates and the rest of the workforce is larger than it has been in more than three decades, as reported by AP.

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Hiring freezes, AI disruption, and economic uncertainty

Economists and policy experts are pointing to many factors, like business hesitation due to economic uncertainty, especially after US President Donald Trump’s tariff hikes, which are weighing heavily on new hiring, according to the report. Companies are cautious, and that’s bad news for those just starting out, as per the report.

Senior economist at the Upjohn Institute, Brad Hersbein, said, “Young people are bearing the brunt of a lot of economic uncertainty,” adding, “The people that you often are most hesitant in hiring when economic conditions are uncertain are entry-level positions,” quoted AP in its report.

Another possible factor is artificial intelligence. While still in its early phases of adoption, some believe AI is already squeezing entry-level white-collar roles, particularly in industries like tech, finance, and legal services, as reported by AP.

CEO of online commerce software company Shopify, Tobi Lutke, said in an April memo that before requesting new hires, “teams must demonstrate why they cannot get what they want done using AI,” as quoted by AP.

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Degrees feel less distinctive — but still matter

Part of the difficulty stems from the sheer number of graduates as more Americans than ever now hold a four-year degree, which is 45% today compared to just 26% in 1992, making it less of a standout in the job market, according to the report.

Despite these challenges, economists still say college degrees provide long-term benefits, including better lifetime earnings and lower unemployment overall, as per AP report.

While job growth continues, much of it is concentrated in sectors like health care, government, and hospitality, not exactly what many degree holders trained for, according to the report.

In traditionally degree-heavy fields like IT, legal services, and accounting, job growth has slowed significantly. Cory Stahle, an economist at the job-listings website Indeed, revealed that postings for software development jobs have fallen 40% compared with four years ago, reported AP.

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No-hire, no-fire economy

Although layoffs remain rare, hiring has slowed to levels last seen in 2014, when unemployment was much higher, as per the report. Economists have dubbed it a “no-hire, no-fire” economy, which is stable, but stagnant, particularly for those trying to start their career, according to the report.

Interest Rates Are Also to Blame

While LinkedIn's head of economics for the Americas, Kory Kantenga, pointed out that the Federal Reserve’s interest rate hikes have also slowed hiring in the tech industry because many IT firms expanded when the Fed lowered its short-term rate to nearly zero after the pandemic, as reported by AP. But in 2022, when the Fed began increasing rates to combat inflation, it made it harder to borrow and grow, as per the report.

FAQs

What fields are still hiring graduates?
Health care, hospitality, and government jobs are seeing growth. Sectors like IT and legal services have slowed down.

Is AI really taking away jobs already?
It’s starting to have an effect, especially in entry-level white-collar roles. Some companies now ask whether AI can do the job before hiring a person.