New college graduates in the United States are stepping into the most difficult labour market in more than a decade. Amid sluggish hiring, rising unemployment, and technological disruption, young professionals aged 22 to 27 are facing an uphill battle to secure entry-level roles in their fields.

The unemployment rate for recent graduates has climbed to its highest point since 2012, excluding the COVID-19 pandemic years. For those aged 22 to 27 with a university degree, joblessness now stands at 5.8%, well above the national average of 4.2%. The disparity between youth unemployment and the overall jobless rate is now wider than at any point in the past 30 years, pointing to structural challenges in the post-education employment pipeline.

While the broader labour market remains relatively stable, the trend is far less promising for early-career professionals. Despite consistent job creation in sectors such as healthcare, hospitality, and government, hiring has slowed or stagnated in traditional graduate-heavy fields like information technology, finance, legal services, and accounting.

A confluence of economic and technological factors is contributing to the downturn. Rising interest rates, driven by efforts to curb inflation, have dampened business expansion and slowed recruitment activity. Many companies that ramped up hiring during the pandemic are now scaling back, particularly in the tech sector. As a result, job postings for roles such as software development have declined significantly in comparison to four years ago.

At the same time, the accelerated development and deployment of artificial intelligence (AI) is reshaping workforce planning. Although AI has not yet replaced large numbers of jobs, it is beginning to affect hiring strategies, especially in white-collar roles. Some firms are prioritising automation and AI integration before approving new hires, which in turn reduces the availability of entry-level positions. These shifts are particularly pronounced in roles that involve data processing, analysis, and routine digital tasks — areas traditionally seen as accessible starting points for new graduates.

The decline in hiring is further reflected in the ‘hiring rate’ — the proportion of new hires relative to the total workforce — which has returned to levels last seen in 2014. This suggests a stagnation in job mobility and fewer opportunities for workers to move into new positions, particularly for those just entering the labour market.

In addition to macroeconomic and technological pressures, there are growing concerns about the changing value of a university degree in a highly saturated job market. With nearly 45% of the workforce now holding a four-year degree, compared to just 26% in 1992, academic qualifications are no longer the distinguishing factor they once were. Graduates are increasingly expected to demonstrate internships, project experience, and technical competencies — elements not always fully covered by university curricula.

The slowdown has prompted many graduates to delay job searches, return to higher education, or shift their focus to industries with more robust hiring trends. While graduate unemployment remains higher than average, layoffs have not surged. Instead, the current environment has been characterised by a “no-hire, no-fire” dynamic — companies are maintaining their existing workforces but hesitating to bring in new staff.

This stagnation poses long-term implications. A delayed start in the workforce can affect earning potential, skill development, and career progression for years to come. Economists note that early-career employment is a key driver of future financial stability and job mobility, making today’s challenges particularly consequential.

Meanwhile, the promise of AI has left some graduates uncertain about their prospects in technology-driven industries. Though AI has not yet significantly impacted hiring across the board, its increasing visibility in corporate strategy is affecting perception and planning. In some cases, new technologies are being introduced faster than institutions can adapt their training, leaving graduates ill-equipped for the roles that remain.

Despite these setbacks, long-term data continues to show that university graduates fare better in terms of lifetime earnings and employment stability compared to non-graduates. However, the current economic and technological climate presents significant obstacles for those entering the workforce now, and recovery in graduate hiring is expected to be slow and uneven across sectors.

As the job market continues to evolve, both educational institutions and employers will face mounting pressure to better align graduate skills with workforce needs, while providing clearer pathways from education to employment.