Federal Reserve Chair Jerome Powell, in conjunction with leading economists from Goldman Sachs and UBS, has brought attention to a concerning trend in 2025: the escalating joblessness among young Americans, particularly recent university graduates. This employment dilemma appears to be a distinctive American phenomenon, largely attributable to a stagnant \"no hire, no fire\" economic climate, rather than the impact of artificial intelligence. The issue disproportionately affects Generation Z and minority job seekers, with significant long-term implications for their financial well-being and wealth accumulation. Additionally, more stringent immigration controls are identified as a factor contributing to the reduced labor supply.
Federal Reserve Chair and Economists Unpack the Mounting Job Crisis for Gen Z
In 2025, a critical discussion has emerged regarding the escalating unemployment rates among young Americans, especially recent university graduates. This pressing issue, a significant economic concern, is not primarily attributed to advancements in artificial intelligence (AI) but rather to a unique economic landscape characterized by a \"no hire, no fire\" approach to employment.
Federal Reserve Chair Jerome Powell has voiced considerable apprehension about the current state of the labor market. He specifically highlighted that young college graduates, individuals from minority backgrounds, and younger demographics are encountering increased difficulties in securing employment opportunities. Powell underscored the prevailing low rates of job acquisition and redundancy, signaling an environment where both hiring and firing activities are notably subdued.
This viewpoint is supported by analyses from prominent economists at Goldman Sachs and UBS, as reported by Fortune. Paul Donovan, chief economist at UBS, observed that the surge in youth unemployment in the U.S. deviates from global trends, suggesting that AI is not the sole, or even primary, cause. Donovan contends that the U.S. labor market's distinctiveness lies in a widespread hiring freeze, which disproportionately impacts new entrants to the workforce.
Pierfrancesco Mei, an economist at Goldman Sachs, further elaborated to Fortune that job reallocation has been steadily declining since the late 1990s. He noted that most job transitions are occurring as \"churn,\" predominantly affecting younger workers. By 2025, this churn was markedly below its pre-pandemic levels.
Interestingly, Donovan pointed out that workers with lower educational attainment are less affected by this trend. High school dropouts, for instance, are securing full-time employment at an earlier age compared to recent graduates, indicating a discernible shift towards vocational and trade-based careers, especially among blue-collar entrepreneurs.
The repercussions for Gen Z and minority job seekers are profound, with experts warning of sustained negative impacts on their earning potential, prospects for homeownership, and overall wealth accumulation. Powell also noted that stricter immigration policies are contributing to a diminished labor supply, thereby intensifying the challenges faced by these groups in the job market.
This situation compels a reevaluation of labor market dynamics and educational pathways. The insights from Chairman Powell and leading economists underscore the urgency of addressing structural issues within the economy that impede the integration of young talent. It suggests that policy interventions might need to focus on stimulating overall hiring, fostering vocational training, and carefully considering the impact of immigration policies on labor supply to mitigate the long-term economic disadvantages for an entire generation. Understanding these underlying factors is crucial for crafting effective solutions that can ensure a more equitable and dynamic job market for all.