Gen Z workers might be the first to feel the squeeze as companies double down on artificial intelligence, according to economist Marc Sumerlin, a leading contender to succeed Jerome Powell as Federal Reserve chair.
Speaking with Australia’s ABC News, Sumerlin warned that while AI could eventually lift productivity, its short-term impact could hurt younger workers entering the job market.
“I’m worried that companies are going to say, ‘I might not be seeing big returns from AI yet, but they’re coming — so I’ll stop hiring young people now,’” he said. “Before we get the good part of AI, we might get the bad part first — less hiring.”
A pause before the payoff
Sumerlin, a former deputy director of the National Economic Council under President George W. Bush, said that many businesses he’s spoken to recently are already seeing encouraging results from early AI adoption.
That success, however, might make employers more cautious about bringing on new staff. “It often takes a year or two before a new hire starts adding value,” he explained. “Companies have to train them first, so they’re making a bet on future productivity — and AI may be changing that calculation.”
He pointed to a worrying trend: unemployment among recent graduates is rising. Federal Reserve data shows the jobless rate for young college grads averaged 4.59% in 2025, up from 3.25% in 2019.
The Fed’s challenge
Sumerlin’s comments come as the Federal Reserve tries to gauge the economy’s strength amid a data blackout caused by the government shutdown. Without reliable numbers, he said, policymakers are “driving in the fog.”
Still, he believes inflation is easing and the Fed should consider cutting rates to help the labor market. “Unemployment has been creeping up for two years,” he noted. “That tells me monetary policy is too tight.”
Gen Z in the AI era
Sumerlin’s warning adds to growing anxiety about how AI is reshaping entry-level jobs. In London, City veteran Quentin Nason described the graduate hiring scene as a “meat grinder,” as recruiters are flooded with applicants and automation trims opportunities.
Others, though, are more optimistic. LinkedIn cofounder Reid Hoffman has called Gen Z “AI native,” saying their comfort with the technology makes them especially valuable to employers. Wharton professor Ethan Mollick advises young people to focus on mastering tasks that AI can’t easily replace.
But not everyone shares that hope. Anthropic CEO Dario Amodei and economist Gary Shilling have both cautioned that many entry-level jobs could vanish before new ones are created — leaving young workers scrambling to adapt.
Goldman Sachs data backs up the concern: unemployment among tech workers in their 20s has jumped nearly three percentage points since early 2024 — more than four times the overall increase.