Weak hiring is hurting young workers more than AI, study says

A shortage of job openings in the US is playing a much bigger role in young people’s unemployment than their lack of artificial intelligence skills, according to a new study from the Federal Reserve Bank of St. Louis.

The unemployment rate among 18- to 24-year-olds rose 2.9 percentage points between April 2023 and December of last year because of a lack of job openings. That’s more than double the 1.1-point increase seen from employers shifting to more AI-related jobs and demanding specialized skills, though the AI effect remains significant.

“Since April 2023, hiring has slowed, and young workers, especially new entrants, have borne the brunt of that softening,” authors William Rodgers III and Alice Kassens wrote. “AI adds an additional headwind at the point of labor market entry, particularly for recent college graduates, but its effects remain smaller than those of the broader decline in job openings.”

The St. Louis Fed study joins another recent study by the Federal Reserve Bank of New York in suggesting something other than AI is the biggest force behind higher joblessness among young people. In that study, researchers pinned more of the blame for a recent increase in unemployment among young college graduates on the rise of remote work, suggesting companies are reluctant to hire young people for work-from-home roles.

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The St. Louis Fed researchers studied young people across educational levels, and notably, how companies’ demand for AI-related jobs was upping the skill requirements for workers, thereby reducing entry-level roles. They did not study job displacement through AI automation.

Among recent college graduates, a shortage of job openings still had a greater effect than AI-related job demand, but the ratio was closer. Weak job openings boosted unemployment by about 2.2 percentage points, while AI demand boosted it by about 1.7 points, the study found.