AI, slowdown squeeze entry-level hiring for Gen Z: Fed chair
MUMBAI, INDIA — A tightening labor market, marked by more job seekers than open positions, is disproportionately impacting young college graduates.
According to a report by The Economic Times, Federal Reserve Chair Jerome Powell acknowledges the unique challenge, suggesting the rapid adoption of artificial intelligence may be reducing traditional entry-level opportunities and creating potential long-term economic scars for a generation.
“Kids coming out of college are having a hard time finding jobs,” Powell said.
Economic, technological pressures intensify unemployment
The major indicators suggest tension: the total number of unemployed people, at 7.4 million, is now higher than the number of vacant positions, at 7.2 million, and the unemployment rate among new graduates has increased to a level higher than the national average.
This general tightening is further exacerbated by certain demographic differences, including the black unemployment rate being well above 7 percent, with a notable deviation in which unemployment is increasing among male graduates and declining among females.
Into this competitive environment steps generative AI, which Deutsche Bank dubbed the culprit in “the summer AI turned ugly.”
Powell has positioned himself cautiously, noting the technology’s potential to replace jobs rather than augment them initially. “In the long run, AI may raise productivity and lead to greater employment. But it is a transformational technology, with effects that are unknowable,” he explains.
He specifically hypothesized that companies that typically hire new graduates may now be using AI to perform those tasks, which could directly impact this cohort.
This suggests that AI is not just a future threat but a present-day factor constraining the primary pathway for young professionals to gain crucial early-career experience and skills.
Long-term economic ‘scarring’ threatens Gen Z
The short-term challenge of employment poses an irreparable harm to the economic opportunities of Gen Z and minority job applicants. Economic studies of labor market scarring or hysteresis, which date back to the work of economists such as David Ellwood, Olivier Blanchard, and Larry Summers, show that joining the labor market during a recession may result in lifetime earnings suppression, delayed milestones like homeownership, and impaired wealth accumulation.
These consequences may be more severe for those who already face systemic barriers, and they may exacerbate existing economic disparities.
Peterson Institute President Adam Posen told Bloomberg that he did not see any long-term wage effects from the Great Recession, but new economic despair is being uncovered.
“But we’re about to get more damage in a stagflationary way from migration restrictions, deportations, sudden stop of growth in the labor force,” Posen explains.
“That’s going to give American workers more bargaining power in the short term, that’s going to create labor shortages, which put upward pressure on wages. That’s going to decrease productivity and capacity.”
A study by David Blanchflower and Alex Bryson describes an increase in the sentiment among young employees that their job is bad, frustrating, and that there is a decline in expectations. When unemployment is on an upward trend, this overwhelming level of desperation may increase not only in individual finances but also in the wider economic morale and stability.
The true cost of today’s hiring challenges may therefore be measured not only in immediate unemployment figures but in the diminished confidence and opportunities of an entire generation.
