What if the greatest danger to getting that first job is not AI, but rather a labor market that simply isn’t moving anymore?
That’s the grim reality Federal Reserve Chairman Jerome Powell illuminated when he called today’s environment a “low firing, low hiring environment,” going on to say that “kids coming out of college and younger people, minorities, are having a hard time finding jobs.” It’s not like firms are cutting positions in droves it’s that they’re hardly adding new ones.
While headlines are keen to attribute Gen Z’s travails to artificial intelligence, Powell and top economists from Goldman Sachs and UBS concur: AI “may be part of the story,” but the actual perpetrator is a widespread hiring freeze. UBS chief economist Paul Donovan labeled the U.S. youth joblessness surge “strange,” noting that young workers in the Eurozone are experiencing record-low levels of unemployment, the UK rate is gradually declining, and Japan’s youth participation is close to historic highs. “It seems highly implausible that AI uniquely hurts the employment prospects of younger US workers,” he said.
The data supports him. Goldman Sachs economist Pierfrancesco Mei discovered churn, the rate at which individuals switch jobs, has declined over the decades and today is far lower than it was pre-pandemic. For young jobless workers, the length of the average job search in low-churn states has increased from 10 weeks in 2019 to 12 weeks in 2025. This slowdown affects new entrants the most, particularly recent graduates with no previous work history to use as bargaining leverage.
History indicates why it matters. Graduating into a weak market can have “scarring effects” on incomes and career advancement for a decade or more. During the Great Recession, graduates from 2007 to 2011 earned less for as many as 15 years than peers who entered in stronger job markets. Studies by North Carolina’s public universities discovered that an increase of just one point in the ratio of jobseekers to openings reduced first-year salaries by 1.1%, although the gap later narrowed over a ten-year period. Nevertheless, those initial years set the tone for savings and homeowning.
There is a twist, too: blue-collar careers are holding up better. Donovan says high school dropouts tended to find full-time jobs prior to the 2025 freeze taking hold, avoiding the clog now strangling white-collar entry positions. Skilled trades, fueled by a sustained decline in college attendance, are drawing young business owners making six figures without the drag of student loan debt.
The rift is not merely educational it’s also gendered. Based on Bureau of Labor Statistics data, 9.1% of men between the ages of 20 and 24 were unemployed early in 2025 compared with 6.6% of women. One explanation? Women have been migrating into health care, an industry with a 162% increase in job listings since pre-pandemic and much lower exposure to AI disruption. Men, in contrast, are still overrepresented in declining tech and finance jobs.
And yes, AI is changing some corners of the marketplace particularly tech. Junior-level job postings in the industry have dropped dramatically, with junior developer work now being performed by large language models. But as Goldman’s Joseph Briggs notes, only roughly 9% of firms are actually implementing AI in production, and the wider youth employment squeeze is more about economic uncertainty, trade tensions, and risk-averse corporate planning than job-deleting robots.
For Generation Z, the way ahead could involve reassessing timing and strategy. Economists point out that recession-era graduates can bounce back, particularly if they transition into industries with consistent demand or reskill through apprenticeships and credentials. Powell himself highlighted immigration policy changes and minority hiring needs as priorities, suggesting that policy not only technology will determine the speed of the thaw.
The lesson? The “AI apocalypse” is good copy, but the actual tale is one of a labor market that’s waiting with bated breath. For young job candidates, that translates to looking past the hype, aiming for industries that are resistant, and remaining flexible until the churn resumes.
