The job market is tough for young people right now, but before you blame the robots, let's take a closer look. A recent analysis suggests that artificial intelligence isn't the primary culprit behind the struggles of young job seekers. Instead, the situation is a bit more… traditional.
This isn't to say AI isn't changing things, but it's not the main reason why young people are facing a tougher time entering the workforce. The core issue? Companies simply aren't hiring as much as they used to.
Since 2023, the unemployment rate for new entrants into the US labor force has increased by over 2.5 percentage points. This is in stark contrast to the unemployment rates of older workers, which have remained relatively stable.
As Dario Perkins, a managing director at Global Data.TS Lombard, points out, "For the AI maximalists, this is 'proof' that companies are deploying the technology rather than hiring graduates. And it is also consistent with what business leaders are saying, with 'AI' now a synonym for 'cost cutting.'"
But here's where it gets controversial... Perkins argues that the real issue is simply a natural economic slowdown. He highlights that overall US hiring is weak, with job creation at levels typically seen during a recession.
So, what's really going on? The report identifies three key factors contributing to the hiring slowdown, and none of them directly involve AI replacing workers:
- Post-Pandemic Overexpansion: Companies expanded their workforces rapidly during the post-pandemic surge and are now adjusting their headcounts.
- Policy Uncertainty: Businesses are hesitant to hire new staff due to uncertain economic policies.
- Tariffs: Trump-era tariffs have squeezed profit margins, leading companies to focus on increasing output from existing employees rather than hiring new ones.
This situation is definitely squeezing young people, but the good news is that overall employment is still stable. The job market outlook should improve once hiring picks up again.
But wait, there's more...
While Perkins' analysis downplays AI's immediate impact, it's worth noting that other analysts have observed a different trend. Some reports suggest that young tech workers, in particular, may be feeling the brunt of AI's effects. For instance, Goldman Sachs reported in August that the unemployment rate for 20- to 30-year-olds in tech has increased by nearly 3 percentage points since early 2024 – over four times the increase in the overall jobless rate. In October, Goldman warned of an era of "jobless growth" in the US due to AI, even as the broader economy remains strong.
So, what do you think? Are you seeing these trends in your own job search or workplace? Do you agree with the analysis that AI isn't the primary driver of the current job market challenges for young people? Share your thoughts in the comments below – let's discuss!
