Young people entering the job market are facing the toughest situation in years, and artificial intelligence is not the reason.
New analysis from a London-based economic consultancy suggests something more traditional is going on. In other words, companies simply aren't hiring.
Since 2023, the unemployment rate for new entrants to the U.S. labor force has increased by more than 2.5 percentage points, in sharp contrast to older workers, whose unemployment rate has remained flat, according to an analysis by Dario Perkins, managing director at Global Data TS Lombard.
“For AI maximalists, this is 'evidence' that companies are deploying technology rather than hiring new graduates,” Perkins wrote. “It also aligns with statements from business leaders that 'AI' is now synonymous with 'cost reduction.'”
But Perkins insists the real reason is simply the normal course of business.
“Employment across the board in the United States is depressed. In fact, the entire economy is now at recession levels in job creation,” he said.
Perkins analysis shows that unemployment rates have not increased as much in sectors with high exposure to AI.
The report identifies three main factors behind the hiring slowdown, none of which involve automation replacing workers.
First, companies rapidly expanded their workforces during the post-pandemic surge and are now normalizing their workforces.
Second, policy uncertainty is making companies cautious about hiring new talent.
Third, Trump-era tariffs have squeezed profit margins, forcing companies to seek more production from existing employees rather than new hires.
This puts pressure on young people, but the good news is that net employment is stable.
Perkins said the employment outlook should improve once hiring picks up.
“Once the economy accelerates again and employment rates recover, employment prospects for new entrants should improve,” he said.
Perkins' report comes as the market continues to assess the impact of AI technology on the economy and jobs.
Other analysts conclude that younger tech workers appear to bear the brunt of the impact. The unemployment rate for 20- to 30-year-old tech workers has increased nearly 3 percentage points since the start of 2024, more than four times the increase in the overall unemployment rate, Goldman Sachs found in an August report.
In October, Goldman warned that AI could usher in an era of “unemployment growth” in the United States, even though the overall economy remains strong.
