When the Degree Doesn’t Open Doors: The Employment Crisis Facing Young Graduates
by Kent O. Bhupathi & Melissa Carleton
In 2025, if you asked the average economist about the U.S. labor market, the answer might sound reassuring: the unemployment rate is holding steady around 4%, inflation is relatively under control, and job growth continues month after month. But ask a 23-year-old college graduate with a crisp new diploma and a browser full of unanswered job applications, and you’ll hear a different story.
A quiet crisis is unfolding in the United States that eludes headline economic metrics yet is painfully evident in overflowing inboxes, mounting loan statements and waning optimism among young Americans entering the workforce. In mid-2025 the unemployment rate for recent U.S. college graduates reached 5.8%, according to Bureau of Labor Statistics data, its highest level in more than a decade apart from the pandemic spike. More strikingly, this graduate jobless rate now exceeds the national figure, overturning the long-standing pattern in which new degree-holders enjoyed lower unemployment than the wider labor market.
The Growing Disconnect Between Metrics and Reality
On paper the wider economy appears stable; yet those figures obscure crucial labor-market subtleties. For young job-seekers the process has become almost Kafkaesque: hundreds of applications, months of silence and an algorithmic barrier that keeps candidates from any human interlocutor. A recent New York Times article profiled a computer-science graduate who had submitted 5,762 applications before turning to unemployment benefits. The figure seems implausible until one speaks to other applicants and encounters similar accounts.
At colleges and universities across the country, professors and career counselors are watching some of their most capable students stumble into a labor market that seems either uninterested or overwhelmed. One professor shared the story of a student with multiple internships, glowing references, and top-tier grades who didn’t receive a single offer for over a year. She wasn’t being picky. She was being ignored.
The struggle isn’t confined to specific majors, either. While tech has seen sharp contractions (particularly in software and early-stage startups), hiring in other sectors has become more cautious as well. According to the National Association of Colleges and Employers (NACE), employer hiring projections for new grads dropped by more than 6% between 2024 and 2025.
Unpacking the Causes
So, what’s behind this disconnect between economic health and youth unemployment?
First, we’re still seeing the ripple effects of COVID-19. The pandemic didn’t just pause hiring, it restructured it. Companies learned to operate leaner. Remote work and automation shifted expectations about who gets hired and where. Many entry-level jobs were automated, outsourced, or absorbed into hybrid roles requiring more experience than a recent graduate can reasonably offer.
Second, global economic uncertainty is tempering corporate risk-taking. Trade tensions, especially with China, have resulted in increased tariffs and regulatory red tape, prompting firms to slow hiring or delay expansion plans. Additionally, the widespread but uneven adoption of artificial intelligence has created an environment where companies are investing in tools before talent, hoping tech can fill gaps without having to invest in training new hires.
According to a Georgetown University Center on Education and the Workforce brief summarized in the "Post-Pandemic Job Market Challenges for Recent Graduates" report, nearly 40% of employers say they are unsure how recent college graduates fit into their new, AI-augmented workflows. That kind of uncertainty isn’t benign. It shows up in the form of rescinded offers, delayed start dates, and job listings that disappear mid-application.
A Generational Economic Pressure Cooker
This hiring drought doesn’t exist in isolation. It’s happening at a time when housing costs remain historically high, student debt repayment has resumed after years of pandemic-related pause, and interest rates have pushed up the cost of everything from credit card balances to car loans.
This isn’t just about first jobs. It’s about first apartments, first savings accounts, and first steps toward financial independence. Every month of delay has compounding effects. Research from the Federal Reserve has long shown that graduating during a recession can lower lifetime earnings. Even short-term unemployment early in one’s career can affect long-term mobility, reducing the odds of reaching higher-income positions later.
And unlike previous downturns, this cohort doesn’t have the option to simply wait it out. Many are graduating with record levels of debt and limited family safety nets. The cost of waiting can be existential.
What Happens When the Old Playbook Fails?
One response to a bleak job market is to look inward and create opportunity on your own terms. Increasingly, young people are choosing the entrepreneurial route, launching small businesses, consultancies, or independent digital ventures. The infrastructure for such efforts is more accessible than ever, with platforms such as Shopify, Substack, and TikTok gaining traction as informal employment options.
However, individuals who succeed by leveraging these platforms represent a small segment of the population of recent graduates. Their successes, while impressive, do not capture the fact that doors have closed in the labor market for the vast majority.
Others are shifting across sectors altogether. Tech graduates are accepting roles in logistics, whereas English majors are moving into analytics. Employers increasingly seek what some call “poly-skilled” workers: individuals who can adapt, combine human communication with technical literacy and master new tools quickly. Yet such agility is a privilege that usually rests on spare time, helpful mentors or access to free learning resources, so it must not be mistaken for a solution available to everyone.
Since mid-2022, the gap between unemployment rates for recent college graduates and all workers has steadily widened, reaching a peak in April 2025.
Although the gap narrowed slightly in June 2025 compared with April, reporting from The New York Times (cited below) indicates that conditions worsened in July and August, and the disparity is likely to continue increasing.
This represents a reversal of the historical pattern in which college graduates typically enjoyed lower unemployment than the broader workforce, signaling a structural shift in the post-pandemic labor market.
What Can Be Done?
Here caution should evolve into a call to action. If the nation is not in a technical recession, it may be slipping into a civic one that undermines trust between generations, institutions, and economic systems. The burden must not fall solely on individuals, asking them to contort themselves to fit a system in disarray.
Here are a few steps policymakers, educators, and employers should be considering:
Incentivize entry-level hiring. Tax credits or subsidies for companies that onboard and train new graduates could lower the perceived risk and cost.
Modernize career services. Universities need to strengthen career pipelines, particularly in nontraditional sectors, and build stronger ties to regional employers.
Increase labor market transparency. Mandating clear salary bands, expected qualifications, and hiring timelines can help job seekers make more informed decisions.
An Invitation, Not Just a Warning
There’s a tendency to look at youth unemployment as a temporary inconvenience, a speed bump on the road to adulthood. But that view is outdated. It misses the structural changes that have been quietly taking place during the past few years due to economic uncertainty and technological development.
We should listen carefully to those attempting to begin their careers today, not merely because they are struggling but because their experiences may reveal early insight into how the labor market is evolving and where it is failing.
For the next recession, when it comes, will not first be announced by a press release. It will be lived quietly, in the paused careers and unrealized potentials of a generation.
The question is not whether the economy is in crisis; it is whom it is failing and whether we will listen before the aggregate statistics finally catch up with the stories.
Sources:
Alonso, Johanna. "Bleak Job Landscape for Today’s Degree Holders." Inside Higher Ed, August 4, 2025. https://www.insidehighered.com/news/students/careers/2025/08/04/report-shows-rising-unemployment-and-layoffs-ba-grads.
Bank of America Institute. "Unemployment Rate for Recent Grads Now Outpaces All Workers." Institute Daily Insights, September 3, 2025. https://institute1.bofa.com/Archive/12873018.pdf?q=1aOykcrZzD!yfbm61XuPCA&__gda__=1758423265_36e46f32deeab6fb8ef786bb76d48b61.
Davis, Steven J., and John Haltiwanger. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation." The Quarterly Journal of Economics 107, no. 3 (August 1992): 819–863. https://doi.org/10.2307/2118365.
deCourcy, Katherine, and Elise Gould. "Class of 2024: Young College Graduates Have Experienced a Rapid Economic Recovery." Economic Policy Institute, Working Economics Blog, May 9, 2024. https://www.epi.org/blog/class-of-2024-young-college-graduates-have-experienced-a-rapid-economic-recovery/.
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