Recent college graduates are diving into the job market, but they’re hitting a major roadblock. The job landscape is actually getting tougher.
Research from the Federal Reserve Bank of New York reveals that the labor market is “deteriorating significantly” as of early 2025, with new entrants to the workforce facing particularly harsh challenges.
In a report from the Labor Bureau, it was noted that employers added 139,000 jobs, while the unemployment rate held steady at 4.2% in May.
The New York Federal Reserve pointed out that while the unemployment rate for all college graduates sits at 2.7%, it climbs to 5.8% for those aged 22 to 27.
This is the best figure since 2021.
However, this rising unemployment rate for recent grads raises alarms about the overall health of the job market, as noted by researchers at Oxford Economics.
“We anticipate that tariffs, high inflation, and low demand will lead to a decrease in employment and a wave of layoffs in the upcoming months,” they stated.
They identified a slowdown in tech jobs and an increased influx of graduates in computer science as significant contributors to the surge in unemployment for this age group.
Some might argue that the post-pandemic normalization is a factor, but researchers mentioned “indications that entry-level jobs are increasingly being replaced by artificial intelligence,” based on a report from May.
Looking ahead, researchers expect the unemployment rate for college graduates to continue rising in the near term, particularly unless there’s a spike in demand from high-tech firms or a mass departure from the workforce among these graduates. They noted that such scenarios “don’t seem unlikely.”
Even though these workers make up only about 5% of the overall workforce, they have had a significant impact on public unemployment rates, according to the report.
Dr. Nathan Mondragon, chief innovation officer at the AI and HR management firm Hirevue, emphasized that job seekers face the dual challenge of not just finding jobs, but also standing out in a fiercely competitive environment.
“With so many applicants for each position, employers are leaning on AI-driven applicant tracking systems to sift through resumes before they even reach human eyes,” Mondragon explained.
