US graduate unemployment hits 37-year high — is AI or Trump-era policy creating a job crisis for Gen Z like never seen before?

Time of India

3 hours ago

Gen Z job market crisis is unfolding in the United States as graduate unemployment surges to its highest level in 37 years. While the national jobless rate holds at 4.2%, young graduates are facing rejection after rejection, with underemployment and shrinking entry-level roles deepening the struggle.
US graduate unemployment has reached a 37-year high, leaving many Gen Z job seekers struggling to land their first role. New data shows that 13.4% of July's unemployed were fresh graduates entering the workforce, highlighting how tough the job market has become.
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A 37-year high that hides behind a low unemployment rate
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Why recent graduates are being hit hardest
Hiring freezes in white-collar sectors
The AI effect on entry-level roles
Degree inflation adds another barrier
Economic uncertainty: Recent layoffs in sectors like tech, retail, and manufacturing have added to hiring caution. Companies are reluctant to bring in inexperienced staff amid unpredictable economic conditions.
Recent layoffs in sectors like tech, retail, and manufacturing have added to hiring caution. Companies are reluctant to bring in inexperienced staff amid unpredictable economic conditions. Trade and tariff impacts: Policies from the Trump era, including tariffs on imports, have disrupted supply chains and slowed business expansion. This ripple effect is reducing the creation of entry-level positions for fresh graduates.
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The numbers behind the struggle
5.8% unemployment among degree holders aged 22–27 (highest since 2012, excluding the pandemic).
unemployment among degree holders aged 22–27 (highest since 2012, excluding the pandemic). 41% underemployment rate for recent graduates, meaning nearly half are working jobs that don't require their degree.
for recent graduates, meaning nearly half are working jobs that don't require their degree. Certain majors are especially vulnerable: unemployment is roughly 9.4% for anthropology, 7.8% for physics, and elevated even in computer science and engineering—fields long considered safe bets.
What this means for Gen Z and the economy
What graduates can do right now
Build AI literacy. Even basic familiarity with AI tools like ChatGPT, Midjourney, or enterprise automation platforms can help graduates stand out.
Even basic familiarity with AI tools like ChatGPT, Midjourney, or enterprise automation platforms can help graduates stand out. Look beyond traditional entry-level paths. Healthcare support, renewable energy, and skilled trades are expanding faster than the oversaturated white-collar pipeline.
Healthcare support, renewable energy, and skilled trades are expanding faster than the oversaturated white-collar pipeline. Prioritize internships and apprenticeships. With companies reluctant to commit to full hires, transitional programs often become backdoor entry points.
With companies reluctant to commit to full hires, transitional programs often become backdoor entry points. Stay regionally flexible. Some labor markets—particularly in the South and Midwest—are showing stronger hiring trends for younger workers.
FAQs:
For the first time since the late 1980s, young Americans are entering a job market that seems stacked against them. The national unemployment rate may sit at a comfortable 4.2%, but for new graduates, the reality is starkly different: unemployment has climbed to levels not seen in 37 years.The reasons are layered—companies are freezing entry-level hiring, artificial intelligence is erasing routine roles, and industries once hungry for fresh talent are now favoring seasoned professionals.Add in mounting student debt and underemployment, and Gen Z finds itself confronting not just a weak job market, but a structural crisis threatening their long-term prospects.On paper, the U.S. economy looks steady. The national unemployment rate stands at, a level that typically signals stability. But zoom in on fresh graduates, and the picture changes dramatically.In July,—a measure that includes recent college grads. That's the highest reading since the late 1980s.This disconnect explains the confusion many young job seekers feel. Older workers are holding onto jobs, the broader economy isn't in recession, yet for those just out of school, the door looks firmly shut.The spike in graduate unemployment isn't random. Several forces have converged to make Gen Z's first steps into the workforce unusually difficult.Industries that traditionally absorbed new grads—tech, finance, consulting—are still cautious after a wave of layoffs and restructuring. Employers are trimming 'junior' positions, preferring experienced hires who can deliver without training. The result: fewer entry-level postings and fiercer competition for the few that exist.Artificial intelligence is quietly erasing the very rungs that graduates used to climb. Routine data analysis, basic coding, and administrative work—once the proving ground for young hires—are increasingly automated.Platforms like Handshake report a, signaling that employers now expect graduates to bring AI skills rather than simply fill roles threatened by it.Employers are demanding higher credentials for roles that previously needed less. This 'credential creep' has forced graduates into a paradox: they borrow heavily for degrees, only to find themselves competing for positions that either undervalue their qualifications or won't hire without further specialization.Even with, these factors are disproportionately affecting young job seekers.The numbers tell a story of wasted potential. Graduates are not only unemployed but also underemployed, which can depress lifetime earnings if early career momentum stalls.The implications stretch beyond the individual job hunt. A generation saddled with student debt but unable to secure stable employment risks pulling back on spending, delaying milestones like home buying or family formation. That in turn slows broader economic growth.There's also a social cost: when highly educated young workers end up driving for gig platforms or piecing together freelance work, trust in higher education erodes. Parents begin to question whether a $200,000 degree makes sense, and policymakers face pressure to rethink how the labor market rewards education.While structural problems won't resolve overnight, there are immediate strategies for job seekers navigating this climate:Gen Z graduates aren't failing the system—the system is failing them. At a time when the U.S. economy looks healthy on the surface, its youngest workers are facing the toughest conditions in nearly four decades.If left unaddressed, the crisis risks leaving a permanent mark on an entire generation's earning power, trust in higher education, and overall economic confidence.Because entry-level jobs are shrinking, AI is replacing routine roles, and companies are cutting back on hiring fresh graduates.It risks long-term underemployment, lower lifetime earnings, and declining trust in the value of a college degree.