The job market for Gen Z college graduates is undergoing significant changes, challenging the long-standing belief that a bachelor’s degree guarantees career success. As the share of the workforce with college degrees grows, new dynamics are shaping employment prospects for young adults entering the workforce.
Rising Unemployment Among Recent Graduates
Ed Yardeni, president and chief investment strategist at Yardeni Research, highlighted in a recent note that unemployment rates for recent college graduates (ages 22–27) have historically been lower than the overall workforce. However, this trend shifted around 2015, well before the rise of generative AI technologies like OpenAI’s chatbot in late 2022. According to the New York Fed, the unemployment rate for recent graduates surpassed the overall rate in December 2014 (5.6% vs. 5.5%), with the two rates fluctuating in the years that followed.
The gap widened significantly during the pandemic, with recent graduates consistently facing higher unemployment than the broader workforce. By June 2025, the unemployment rate for recent grads stood at 4.8%, compared to 4.0% for all workers. In contrast, the jobless rate for college graduates across all age groups has remained significantly lower than the overall rate for over three decades.
A Crowded Field of College-Educated Workers
Yardeni suggests that the growing proportion of college-educated individuals in the workforce may be a key factor. Citing the Education Data Initiative, he noted that 37.5% of Americans now hold a bachelor’s degree or higher, up from 25.6% in 2000. Between 1993 and 2023, the number of college graduates surged by 74.9%, compared to a modest 14% increase for those with only a high school diploma. This influx means recent graduates are competing with more experienced degree-holders for the same roles.
Challenges by College Major
A New York Fed analysis reveals disparities in unemployment rates across college majors. Graduates in fields like computer engineering, computer science, physics, and information systems management face higher jobless rates than the overall workforce. Yardeni suggests this could stem from an oversupply of graduates in computer-related fields, making it harder for them to secure desirable positions.
The Role of AI in the Job Market
While some point to AI as a factor in shrinking entry-level opportunities, the evidence is mixed. A Cengage Group survey indicates that AI is among the reasons employers plan to hire fewer or the same number of entry-level workers compared to last year. However, a 2023 National Bureau of Economic Research paper found that AI adoption can lead to flatter organizational structures, empowering lower-level employees to use AI tools for decision-making without managerial oversight.
Other economic factors, such as inflation driven by policies like President Donald Trump’s tariffs, have also increased uncertainty, making companies hesitant to expand hiring, according to Yardeni.
A Global Perspective
Not all economists agree that AI is the primary driver of Gen Z’s employment challenges. UBS chief economist Paul Donovan notes that young workers in the euro zone enjoy record-low unemployment, while youth unemployment in the U.K. has steadily declined, and labor participation among young people in Japan is near historic highs. Donovan argues that it’s unlikely AI uniquely impacts U.S. youth employment, pointing to peculiarities in the U.S. labor market.
Shifting Attitudes Toward College and Trade Jobs
The growing challenges for college graduates coincide with a broader shift in perceptions about higher education. A recent Gallup Poll found that only 35% of Americans view college as “very important,” a record low, down from 51% in 2019 and 75% in 2010. The combination of a competitive job market and the student debt crisis is prompting Gen Z to reconsider the value of a degree. Many are turning to trade jobs, which offer hands-on work and less exposure to AI-driven disruptions.
The job market for Gen Z college graduates is more competitive than ever, driven by a larger pool of degree-holders, challenges in certain academic fields, and broader economic uncertainties. While AI plays a role, it’s not the sole factor. As young people navigate this landscape, many are exploring alternatives to traditional college paths, signaling a potential shift in how future generations approach education and career planning.