What\u2019s going on? I see three plausible explanations, and each might be a little bit true.<\/p>\n
The first theory is that the labor market for young people never fully recovered from the coronavirus pandemic\u2014or even, arguably, from the Great Recession. \u201cYoung people are having a harder time finding a job than they used to, and it\u2019s been going on for a while, at least 10 years,\u201d David Deming, an economist at Harvard, told me. The Great Recession led not only to mass layoffs but also to hiring freezes at many employers, and caused particular hardships for young people. After unemployment peaked in 2009, the labor market took time to heal, improving slowly until the pandemic shattered that progress. And just when a tech boom seemed around the corner, inflation roared back, leading the Federal Reserve to raise interest rates and cool demand across the economy. White-collar industries\u2014especially technology\u2014were among the hardest hit. The number of job openings in software development<\/a> and IT operations<\/a> plunged. The share of jobs posted on Indeed in software programming has declined by more than 50 percent since 2022. For new grads hoping to start a career in tech, consulting, or finance, the market simply isn\u2019t that strong.<\/p>\n Read: <\/a>The job market is frozen<\/a><\/p>\n A second theory points to a deeper, more structural shift: College doesn\u2019t confer the same labor advantages that it did 15 years ago. According to research by the San Francisco Federal Reserve, 2010 marked<\/a> a turning point, when the lifetime-earnings gap between college grads and high-school graduates stopped widening. At the same time, the share of online job postings seeking workers with a college degree has declined<\/a>.<\/p>\n To be clear: College still pays off, on average. The college wage premium was never going to rise forever, and the fact that non-college workers have done a little better since 2010 isn\u2019t bad news; it\u2019s actually great news for less educated workers. But the upshot is a labor market where the return on investment for college is more uncertain.<\/p>\n The third theory is that the relatively weak labor market for college grads could be an early sign that artificial intelligence is starting to transform the economy.<\/p>\n \u201cWhen you think from first principles about what generative AI can do, and what jobs it can replace, it\u2019s the kind of things that young college grads have done\u201d in white-collar firms, Deming told me. \u201cThey read and synthesize information and data. They produce reports and presentations.\u201d<\/p>\n Consider, then, a novel economic indicator: the recent-grad gap. It\u2019s the difference between the unemployment of young college graduates and the overall labor force. Going back four decades, young college graduates almost always have a lower\u2014sometimes much lower\u2014unemployment rate than the overall economy, because they are relatively cheap labor and have just spent four years marinating in a (theoretically) enriching environment.<\/p>\n But last month\u2019s recent-grad gap hit an all-time low. That is, today\u2019s college graduates are entering an economy that is relatively worse for young college grads than any month on record, going back at least four decades.<\/p>\n The strong interpretation of this graph is that it\u2019s exactly what one would expect to see if firms replaced young workers with machines. As law firms leaned on AI for more paralegal work, and consulting firms realized that five 22-year-olds with ChatGPT could do the work of 20 recent grads, and tech firms turned over their software programming to a handful of superstars working with AI co-pilots, the entry level of America\u2019s white-collar economy would contract. The chaotic Trump economy could make things worse. Recessions can accelerate technological change<\/a>, as firms use the downturn to cut less efficient workers and squeeze productivity from whatever technology is available. And even if employers aren\u2019t directly substituting AI for human workers, high spending on AI infrastructure may be crowding out spending on new hires.<\/p>\n![\"Graph](\"https:\/\/www.europesays.com\/us\/wp-content\/uploads\/2025\/07\/original.png\")
The Atlantic<\/p>\n