Federal Reserve Chair Jerome Powell has sounded the alarm on what many recent graduates already know\u2014getting a job right out of college is really hard right now. Speaking at his regular press conference following the Federal Open Market Committee meeting, Powell called it \u201can interesting labor market.\u201d He said people \u201ckids coming out of college and younger people, minorities, are having a hard time finding jobs.\u201d Overall, the \u201cjob finding rate\u201d is very low, Powell said, but then again, so is the layoff rate. \u201cSo you\u2019ve got a low firing, low hiring environment.\u201d<\/p>\n\n\n\n
Recent labor reports indicate that, indeed, it\u2019s hard out there. The Black unemployment rate climbed above 7% in August, while the rate for recent graduates<\/a> has surged above the overall rate for the first time in recent history. Apollo Global Management<\/a> Chief Economist Torsten Slok, famous on Wall Street for being first to notice a wrinkle in the data, noted that it\u2019s actually falling<\/a> for recent graduates who are female and rising for recent graduates who are men. More generally, Slok also noted shortly ahead of the FOMC meeting that America has more unemployed people than job openings<\/a>: 7.4 million to 7.2 million.<\/p>\n\n\n\n The last few months of 2025, called \u201cthe summer AI turned ugly<\/a>\u201d by Deutsche Bank<\/a>, were full of anecdotal evidence that AI adoption is not going smoothly<\/a> at the corporate level, on the one hand, and that it\u2019s destroying entry-level hiring<\/a>, on the other.<\/p>\n\n\n\n Powell himself has previously weighed in on the AI jobs debate, which saw predictions of a 50% wipeout of white-collar jobs and a fourth industrial revolution creating a bounty of new positions, by staking out a middle position. \u201cThere\u2019s certainly a possibility that, at least in the beginning, AI will replace a lot of jobs, rather than just augmenting people\u2019s labor,\u201d Powell told the Senate Banking Committee<\/a> in late June. \u201cIn the long run, AI may raise productivity and lead to greater employment. But it is a transformational technology, with effects that are unknowable.\u201d<\/p>\n\n\n\n On Wednesday, Powell refused to be drawn on this specifically, saying \u201cthere\u2019s great uncertainty\u201d around the question of AI\u2019s impact on the labor market. \u201cI think, my view, which is also a bit of a guess, but widely shared, I think, is that you are seeing some effects, but it\u2019s not the main, not the main thing driving it.\u201d Still, regarding young people coming out of college, he said \u201cthere may be something there. It may be that companies or other institutions that have been hiring younger people right out of college are able to use AI that more than they had in the past. That may be part of the story.\u201d<\/p>\n\n\n\n Powell sought to focus reporters\u2019 minds, saying that the economy has simply slowed down and job creation has broadly slowed down with it. AI is \u201cprobably a factor,\u201d he added. \u201cHard to say how big it is.<\/p>\n\n\n\n The plight of Gen Z and minority jobseekers could reverberate well into the future, with ramifications not just for individual households but for the broader U.S. economy. Research shows that entering the job market during an economic slump can lower lifetime earnings, delay homeownership, and hamper wealth building, particularly for those already facing systemic barriers.<\/p>\n\n\n\n Academics have been studying the \u201cscarring effects,\u201d or labor market \u201chysteresis,\u201d that result from economic downturns for decades. Harvard professor David Ellwood<\/a> introduced the language of \u201cpermanent scars\u201d<\/a> in 1982, and Olivier Blanchard and Larry Summers advanced the research in a groundbreaking 1986 paper<\/a>, arguing that unemployment, particularly following a recession, can have a major impact on someone\u2019s career for many years to come. Adam Posen, President of the Peterson Institute for International Economics, told Bloomberg\u2019s Odd Lots podcast<\/a> in August that economics have looked hard for hysteresis since the Great Recession of 2008 but have not found it.<\/p>\n\n\n\n David Blanchflower of Dartmouth College and Alex Bryson of University College London have found something curious: youth wages and unemployment have not suffered dramatically since the 2010s, but they see an unmistakable rise in \u201cdespair\u201d among young workers, stretching out over the past decade. Blanchflower told Fortune<\/em><\/a> earlier this month that he thinks it can be summed up in an attitude of \u201cthis job sucks.\u201d Now to that picture, you add something unmistakable: unemployment is going in the wrong direction.<\/p>\n\n\n\nLong-term consequences<\/h2>\n\n\n\n