The number of Americans filing new applications for jobless benefits fell last week, but work opportunities are becoming scarce as businesses remain hesitant to hire because of an uncertain economic outlook, raising the risk of the unemployment rate increasing in June.

GDP REVISED LOWER




While completing a master’s degree in data analysis, Palwasha Zahid moved from Dallas to a town near Silicon Valley. The location made it easy to visit the campuses of tech stalwarts such as Google, Apple, and Nvidia.
Zahid, 25, completed her studies in December, but so far she hasn’t found a job in the industry that surrounds her.
“It stings a little bit,” she said. “I never imagined it would be this difficult just to get a foot in the door.”
Young people graduating from college this spring and summer are facing one of the toughest job markets in more than a decade. The unemployment rate for degree holders ages 22 to 27 has reached its highest level in a dozen years, excluding the coronavirus pandemic. Joblessness among that group is now higher than the overall unemployment rate, and the gap is larger than it has been in more than three decades.
The rise in unemployment has worried many economists as well as officials at the Federal Reserve because it could be an early sign of trouble for the economy. It suggests businesses are holding off on hiring new workers because of rampant uncertainty stemming from the Trump administration’s tariff increases, which could slow growth.
“Young people are bearing the brunt of a lot of economic uncertainty,” Brad Hersbein, senior economist at the Upjohn Institute, a labor-focused think tank, said. “The people that you often are most hesitant in hiring when economic conditions are uncertain are entry-level positions.”
The growth of artificial intelligence may be playing an additional role by eating away at positions for beginners in white-collar professions such as information technology, finance, and law.
Higher unemployment for younger graduates has also renewed concerns about the value of a college degree. More workers than ever have a four-year degree, which makes it less of a distinguishing factor in job applications. Murat Tasci, an economist at JPMorgan, calculates that 45% of workers have a four-year degree, up from 26% in 1992.
While the difficulty of finding work has demoralized young people like Zahid, most economists argue that holding a college degree still offers clear lifetime benefits. Graduates earn higher pay and experience much less unemployment over their lifetimes.
The overall U.S. unemployment rate is a low 4.2%, and the government’s monthly jobs reports show the economy is generating modest job gains. But the additional jobs are concentrated in health care, government, and restaurants and hotels. Job gains in professions with more college grads, such as information technology, legal services, and accounting have languished in the past 12 months.
The unemployment rate has stayed low mostly because layoffs are still relatively rare. The actual hiring rate — new hires as a percentage of all jobs — has fallen to 2014 levels, when the unemployment rate was much higher, at 6.2%. Economists call it a no-hire, no-fire economy.
For college graduates 22 to 27 years old, the unemployment rate was 5.8% in March, the highest, excluding the pandemic, since 2012, and far above the nationwide rate.
Lexie Lindo, 23, saw how reluctant companies were to hire while applying for more than 100 jobs last summer and fall after graduating from Clark Atlanta University with a business degree and a 3.8 GPA. She had several summer internships in fields such as logistics and real estate while getting her degree, but no offer came.
“Nobody was taking interviews or responding back to any applications that I filled out,” Lindo, who is from Auburn, Georgia, said. “My resume is full, there are no gaps or anything. Every summer, I’m doing something. It’s just, ‘OK, so what else are you looking for?’”
She has returned to Clark for a master’s program in supply chain studies and has an internship this summer at a Fortune 500 company in Austin, Texas. She’s hopeful it will lead to a job next year.
Artificial intelligence could be a culprit, particularly in IT. Matthew Martin, senior U.S. economist at Oxford Economics, has calculated that employment for college graduates 28 and above in computer science and mathematical occupations has increased by a slight 0.8% since 2022. For those ages 22 to 27, it has fallen 8%, according to Martin.
Company announcements have further fueled concerns. Tobi Lutke, CEO of online commerce software company Shopify, said in an April memo that before requesting new hires, “teams must demonstrate why they cannot get what they want done using AI.”
Last week, Amazon CEO Andy Jassy said AI would likely reduce the company’s corporate workforce over the next few years.
“We will need fewer people doing some of the jobs that are being done today, and more people doing other types of jobs,” Jassy said in a message to employees. “We expect that this will reduce our total corporate workforce as we get efficiency gains from using AI extensively across the company.”
Zahid worries that AI is hurting her chances. She remembers seeing big billboard ads for AI at the San Francisco airport that asked, “Why hire a human when you could use AI?”
Still, many economists argue that blaming AI is premature. Most companies are in the early stages of adopting the technology.
Professional networking platform LinkedIn categorized occupations based on their exposure to AI and did not see big hiring differences between professions where AI was more prevalent and where it wasn’t, said Kory Kantenga, the firm’s head of economics for the Americas.
“We don’t see any broad-based evidence that AI is having a disproportionate impact in the labor market or even a disproportionate impact on younger workers versus older workers,” Kantenga said.
He added that the Federal Reserve’s interest rate hikes have also slowed hiring in tech. Many IT firms expanded when the Fed pinned its short-term rate at nearly zero after the pandemic. In 2022, the Fed began cranking up rates to combat inflation, which made it harder to borrow and grow.
In fact, IT’s hiring spree when rates were low — fueled by millions of Americans ramping up their online shopping and video conferencing — left many firms with too many workers, economists say.
Cory Stahle, an economist at the job-listings website Indeed, says postings for software development jobs, for example, have fallen 40% compared with four years ago. It’s a sharp shift for students who began studying computer science when hiring was near its peak.
Zahid, who lives in Dublin, California, has experienced this whiplash firsthand. When she entered college in 2019, her father, who is a network engineer, encouraged her to study IT and said it would be easy for her to get a job in the field.
She initially studied psychology but decided she wanted something more hands-on and gravitated to data analysis. Her husband, 33, has a software development job, and friends of hers in IT received immediate job offers upon graduation a few years ago. Such rapid hiring seems to have disappeared now, she said.
She has her college diploma, but hasn’t hung it up yet.
“I will put it up when I actually get a job, confirming that it was worth it all,” she said.
Hundreds of millions of ‘Buy Now, Pay Later’ loans will soon affect credit scores for millions of Americans who use the loans to buy clothing, furniture, concert tickets, and takeout.
Scoring company FICO said Monday that it is rolling out a new model that factors the short-term loans into their consumer scores. A majority of lenders use FICO scores to determine a borrower’s credit worthiness. Previously, the loans had been excluded, though Buy Now, Pay Later company Affirm began voluntarily reporting pay-in-four loans to Experian, a separate credit bureau, in April.
The new FICO scores will be available beginning in the fall, as an option for lenders to increase visibility into consumers’ repayment behavior, the company said. Still, not all Buy Now, Pay Later companies share their data with the credit bureaus, and not all lenders will opt in to using the new models, so widespread adoption could take time, according to Adam Rust, director of financial services at the nonprofit Consumer Federation of America.
Here’s what to know.
Why haven’t the loans appeared in credit scores previously?
Typically, when using Buy Now, Pay Later loans, consumers pay for a given purchase in four installments over six weeks, in a model more similar to layaway than to a traditional credit card. The loans are marketed as zero-interest, and most require no credit check or only a soft credit check.
The three main credit reporting bureaus, Experian, TransUnion, and Equifax, haven’t yet incorporated a standard way of including these new financial products in their reports, since they don’t adhere to existing models of lending and repayment. FICO, the score of the Fair Isaac Corporation, uses data from the bureaus to calculate its own credit score, and is independently choosing to pilot a new score that takes the loans into account.
Why is this important?
BNPL providers promote the plans as safer alternatives to credit cards, while consumer advocates warn about “loan stacking,” in which consumers take on many loans at once across several companies. So far, there’s been little visibility into this practice in the industry, and the opacity has led to warnings of “phantom debt” that could mask the health of the consumer.
In a statement, FICO said that their new credit score model is accounting for the growing significance of the loans in the U.S. credit ecosystem.
“Buy Now, Pay Later loans are playing an increasingly important role in consumers’ financial lives,” said Julie May, vice president and general manager of business-to-business scores at FICO. “We’re enabling lenders to more accurately evaluate credit readiness, especially for consumers whose first credit experience is through BNPL products.”
What does FICO hope to achieve?
FICO said the new model will responsibly expand access to credit. Many users of BNPL loans are younger consumers and consumers who may not have good or lengthy credit histories. In a joint study with Affirm, FICO trained its new scores on a sample of more than 500,000 BNPL borrowers and found that consumers with five or more loans typically saw their scores increase or remain stable under the new model.
For consumers who pay back their BNPL loans in a timely way, the new credit scoring model could help them improve their credit scores, increasing access to mortgages, car loans, and apartment rentals. Currently, the loans don’t typically contribute directly to improved scores, though missed payments can hurt or ding a score.
Since March, credit scores have declined steeply for millions, as student loan payments resume and many student borrowers find themselves unable to make regular payments on their federal student loans.
What are the risks and concerns?
Nadine Chabrier, senior policy and litigation counsel at the Center for Responsible Lending, said her main concern is that the integration of the loans into a score could have unexpected negative effects on people who are already credit-restrained.
“There isn’t a lot of information out there about how integrating BNPL into credit scoring will work out,” Chabrier said. “FICO simulated the effect on credit scoring through a study. They saw that some users’ scores increased. But if you factor in something that, last week, didn’t affect your credit, and this week, it does, without having very much information about the modeling, it’s a little hard to tell what the consequences will be.”
Chabrier cited research that’s shown that many BNPL users have revolving credit card balances, lower credit scores, delinquencies, and existing debt. Women of color are also more likely to use the loans, she said.
“This is a credit vulnerable community,” said Chabrier.
Will consumers see immediate effects?
Rust, of the Consumer Federation of America, said he doesn’t expect this to be a game-changer for consumers who already have a credit profile.
“Are we at a point where using BNPL loans will dramatically alter your credit profile? Probably not,” he said. “I think it’s important that people have reasonable expectations.”
Rust said the average BNPL loan is for $135, and that repaying such small loans, even consistently, might not result in changes to a credit score that would significantly move the needle.
“It’s not about going from 620 to 624. It’s about going from 620 to 780,” he said, referring to the kind of credit score jumps that affect one’s credit card offers, interest rates on loans, and the like.
Still, Rust said that increased transparency around the loans could create a more accurate picture of a consumer’s debts, which could improve accurate underwriting and keep consumers from over-extending themselves.
“This addresses the problem of ‘phantom debt,’ and that’s a good thing,” he said. “Because it could be something that keeps people from getting too deeply into debt they can’t afford.”
The average rate on a 30-year U.S. mortgage fell to its lowest level since early May, an encouraging trend for prospective homebuyers at a time when the U.S. housing market remains largely held back by elevated borrowing costs and rising prices.
The long-term rate fell to 6.77% from 6.81% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.86%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell. The average rate dropped to 5.89% from 5.96% last week. A year ago, it was 6.16%, Freddie Mac said.
High mortgage rates can add hundreds of dollars a month in costs for borrowers and reduce their purchasing power. That’s helped keep the U.S. housing market in a sales slump that dates back to 2022, when mortgage rates began to climb from the rock-bottom lows they reached during the pandemic.
Last year, sales of previously occupied U.S. homes sank to their lowest level in nearly 30 years. They’ve remained sluggish so far this year, as many prospective homebuyers have been discouraged by elevated mortgage rates and home prices that have kept climbing, albeit at a slower pace.
Elevated borrowing costs are also putting pressure on the new-home market. Sales of new U.S. homes fell nearly 14% in May from the previous month, the government reported Wednesday.
“Stuck in a bit of a rut, the housing market continues to suffer from high home prices and elevated mortgage rates,” said Hannah Jones, senior economic research analyst at Realtor.com. “However, for-sale inventory in much of the country could help soften upward price pressure and usher in a more friendly housing market for buyers.”
New data suggests sales could pick up in the coming months. A seasonally adjusted index of pending U.S. home sales rose 1.8% in May from the previous month and increased 1.1% from May last year, the National Association of Realtors said Thursday.
There’s usually a month or two lag between a contract signing and when the sale is finalized, which makes pending home sales a bellwether for future completed home sales.
Mortgage rates are influenced by several factors, from the Federal Reserve’s interest rate policy decisions to bond market investors’ expectations for the economy and inflation.
The key barometer is the 10-year Treasury yield, which lenders use as a guide to pricing home loans. The yield was at 4.28% in midday trading on Thursday, down from 4.58% just a few weeks ago.
The average rate on a 30-year mortgage has remained relatively close to its high so far this year of just above 7%, set in mid-January. The 30-year rate’s low point this year was in early April when it briefly dipped to 6.62%.
Mortgage rates have now fallen four weeks in a row, reflecting the recent pullback in bond yields. With the latest decline, the average rate is now at its lowest level since May 8, when it was 6.76%.
The decline in mortgage rates may have encouraged some home shoppers. Last week, mortgage applications rose 1.1% from a week earlier, according to the Mortgage Bankers Association.
Economists generally expect mortgage rates to stay relatively stable in the coming months, with forecasts calling for the average rate on a 30-year mortgage to remain in a range between 6% and 7% this year.