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Young Americans just out of school are hitting a major roadblock: companies are hiring cautiously, and it’s Gen Z that’s bearing the brunt of it.
A recent analysis from the Federal Reserve Bank of Richmond shows that people entering the labor force for the first time — many of them fresh high school and college grads — make up a larger share of the unemployed than at any time since 1988.
In July, 13.4% of all unemployed workers were new to the workforce, a peak not seen in 37 years, according to Axios.
That’s a stark indicator of how tight hiring has become, especially for those without prior experience. While the overall unemployment rate is relatively stable at 4.2%, it masks a growing struggle among new job seekers trying to break in.
Among young adults aged 22 to 27, the jobless rate for college graduates has returned to levels seen in the sluggish years following the Great Recession — excluding the pandemic dip.
For their peers without degrees, it’s even harder. The larger unemployment rate for this age group stood at 7.4% during Q2 of this year.
Adding to the challenge: long-term unemployment is climbing again. Over a quarter of all unemployed individuals (25.2%) have been out of work for 27 weeks or more, the highest percentage since early 2022.
Economist John O’Trakoun, who authored the Richmond Fed’s report, calls the current climate a “double-whammy” for Gen Z. Many entered college during the height of the pandemic, starting their education remotely, often from their childhood bedrooms. Now, they’re graduating into a labor market that’s slow to absorb new talent.
In short, getting a foot in the door is proving more difficult than it has in decades — especially when companies are waiting for greater economic clarity before opening it.
