Recent College Grads Bear Brunt of Labor Market Shifts

The July 2025 jobs report revealed a notable slowdown. Payroll growth decelerated dramatically, averaging a mere 35,000 new jobs over the last three months—far below the robust gains of prior years. The unemployment rate, which has been hovering around 4.1% since May 2024, ticked upward to 4.2% in July 2025 from 4.1% in June 2025. Labor force participation also dipped from 62.6% in April to 62.2% in July.

While these numbers might seem modest in isolation, they mark a meaningful departure from strong labor markets before and after the COVID-19 pandemic. To put this in perspective, the unemployment rate averaged just 3.7% in 2019, making today’s 4.2% rate a significant 0.5 percentage point increase. This shift suggests that the labor market’s strong postpandemic recovery is losing steam, with effects that vary significantly across different worker groups.

Softening Labor Market Hits Young College Graduates

Labor market softening is hitting recent college graduates especially hard. Data from the Current Population Survey show a troubling pattern for young workers who have recently graduated. Young college graduates between ages 23 and 27 are experiencing unemployment rates that average 4.59% in 2025—a stark contrast to the 3.25% rate this same demographic experienced in 2019.Refers to people who have at least a bachelor’s degree. The 2019 values represent averages from January through December, while the 2025 values cover January through July.

This 1.34 percentage point increase represents more than just a statistical noise; it reflects a significant shift in how the economy is absorbing newly educated workers. The magnitude of this change becomes even more striking when compared with that of other demographic groups. Noncollege-educated workers in the same age range have seen only a modest 0.47 percentage point increase in unemployment, while older college graduates have experienced a 0.38 percentage point rise.

These disparities suggest that the traditional premium associated with higher education—at least for quickly landing a job—may be weakening. Recent graduates are finding themselves in an increasingly competitive environment where their educational credentials don’t guarantee the same level of employment security they once did.

White-collar Occupations under Pressure

These developments highlight growing concerns about technological disruption in white-collar employment. For example, workers in computer occupations, who historically enjoyed very low unemployment, have seen unemployment rates jump from an average of 1.98% in 2019 to 3.02% in 2025—a substantial 1.04 percentage point increase. The largest increase occurred in the broad category of arts, design, entertainment, sports and media occupations with a dramatic 1.77 percentage point spike in the unemployment rate.

These trends align with discussions about the impact of artificial intelligence (AI) and large language models on professional roles, with anecdotal reports of skilled programmers seeking employment in traditional service industries underscoring the severity of this shift.For example, see this recent New York Times article, “Goodbye, $165,000 Tech Jobs. Student Coders Seek Work at Chipotle.” In our next blog post, we will discuss whether generative AI adoption correlates with recent unemployment patterns across occupations.

Conclusion

These employment trends reflect broader economic forces reshaping the labor market. The concentration of unemployment increases among recent college graduates and white-collar workers suggests that traditional assumptions about education and career security may need significant revision. The data indicate that even highly educated workers in previously stable fields are not immune to economic disruption.

As we continue to monitor these developments, the July employment data serve as a reminder that beneath aggregate statistics lie complex stories of individual and group experiences that deserve careful attention and thoughtful policy responses.

Notes

1. Refers to people who have at least a bachelor’s degree. The 2019 values represent averages from January through December, while the 2025 values cover January through July.
2. For example, see this recent New York Times article, “Goodbye, $165,000 Tech Jobs. Student Coders Seek Work at Chipotle.”