Recent college graduates in the United States are entering the spring hiring season with an unemployment rate that has exceeded the overall national rate for five consecutive years, according to new data published by the Federal Reserve Bank of New York, marking the longest stretch of underperformance for new degree-holders since the bank began tracking the cohort in 1990. The unemployment rate for Americans ages 22 to 27 with at least a bachelor’s degree held at 5.7% in the first quarter of 2026, while the broader national unemployment rate stood near 4.2%, reversing decades of conventional wisdom about the early-career value of a college credential.
The data, released Tuesday by New York Fed economists Jaison R. Abel and Richard Deitz, also showed underemployment among recent graduates reached 41.5%, meaning more than four in ten degree-holders are working in jobs that do not typically require a bachelor’s degree. By comparison, unemployment among similarly aged Americans without four-year degrees fell to 7.2% from 7.7%. According to a recent Federal Reserve Bank of Cleveland commentary by economist Murat Tasci, the gap between college and non-college workers has narrowed to levels not seen since the late 1970s.
Economists increasingly view the trend as evidence of a structural shift in the early-career labor market. Oxford Economics estimated that new workforce entrants accounted for roughly 85% of the total rise in U.S. unemployment since mid-2023, while a Fortune analysis with the Groundwork Collaborative found the share of unemployed Americans classified as new workforce entrants reached a 37-year high in 2025. Junior-level job postings on Indeed declined 7% year over year in 2025, even as senior-level listings increased 4%. Internship openings — traditionally the main pipeline into full-time employment — have fallen to their lowest level since 2020.
Wall Street executives are beginning to openly warn about the trend. BlackRock Chief Executive Larry Fink recently cautioned that the class of 2026 could face the highest unemployment rate for new graduates in years. A Gallup survey released Monday found only 43% of younger Americans believe now is a “good time” to find a job, down 27 percentage points from 2023 and the widest perception gap between younger and older workers among developed economies surveyed.
Much of the public debate has focused on artificial intelligence. Research published May 8 by Anthropic found that job-finding rates for workers in AI-exposed occupations have declined roughly 14% since OpenAI released ChatGPT in late 2022, with nearly all of the deterioration concentrated among workers under 25 years old. A February 2026 paper from the Federal Reserve Bank of Dallas similarly concluded that generative AI is simultaneously reducing entry-level hiring while increasing wages for experienced workers in AI-sensitive industries.
Other economists caution against oversimplifying the explanation. The Economic Policy Institute noted that young workers without degrees are also facing rising unemployment despite lower exposure to white-collar automation, suggesting broader labor-market weakness remains a major factor.
Many analysts instead point to a hiring market that has largely frozen. Higher interest rates, post-pandemic overhiring corrections across technology and consulting firms, and increasing automation of entry-level analytical tasks have all reduced openings for inexperienced applicants. Ben Zweig, chief executive of labor-market analytics firm Revelio Labs, told the Washington Post he does not yet see widespread “AI displacement” so much as companies slowing hiring, delaying expansion plans, and avoiding junior recruiting altogether.
The competition for remaining openings has intensified sharply. Cengage Group reported that only 30% of 2025 graduates secured full-time employment in their field of study. Campus recruiting platform Handshake found that applications per internship posting nearly doubled from 2024 to 2025, reaching 273 applicants per opening in technology and 192 in finance.
The outcomes vary significantly by field of study. According to New York Fed data, special education, elementary education, secondary education, and nursing continue producing strong employment outcomes because those sectors maintain direct pipelines into hospitals and school systems. Nursing also posted the lowest underemployment rate among tracked majors at 12.8%.
By contrast, computer science, business analytics, and many liberal-arts majors have experienced significantly weaker outcomes over the past year as hiring slows across white-collar industries. The Economic Policy Institute’s Valerie Wilson also reported that young Black college graduates have faced disproportionately higher unemployment, with employment among young Black men remaining below first-quarter 2025 levels.
The implications extend well beyond the labor market itself. Economists increasingly connect weaker early-career earnings to delayed household formation, reduced consumer spending, lower homeownership rates, and shifting political attitudes among younger Americans already carrying elevated student debt burdens.
With companies including Anthropic, OpenAI, Microsoft, and Alphabet continuing aggressive enterprise AI deployment through 2026, many labor economists do not expect entry-level white-collar hiring conditions to improve quickly.
For now, the message emerging from the Federal Reserve’s data is increasingly difficult to ignore: a college degree still improves lifetime earnings overall, but the early-career advantage that defined the American labor market for decades has narrowed sharply — and for the class of 2026, entering the workforce may be the hardest part.
JBizNews Desk
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