What the graduate unemployment story gets wrong

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You’d have to be living under a rock to escape the labor market story of the past year: the major graduate unemployment crisis. Those with a degree have long been accustomed to weathering economic storms better than their non-degreed contemporaries, and have found unemployment rising more steeply recently than those without a college degree, from the United States to Europe.

But what if this alumni tale of woe is off the beam, based on a misleading analysis of the data? What if accompanying narratives that seek to explain why the most educated perform poorly focus on the mirage?

To illustrate: We know that high unemployment rates are primarily due to poor employment, not job losses. This dynamic is particularly important for new entrants to the labor market. Analysis of unemployment among recent graduates in the United States confirms that this rise is due almost exclusively to the struggle faced by those who have recently exited the education system.

But studies that have found a less positive image of recent college graduates compared to their non-college contemporaries make a critical misstep in limiting their analysis to people in their mid-20s.

A 23-year-old college graduate recently looking for a job is highly vulnerable to the current hiring slowdown. A 23-year-old, who had exited the education system several years earlier at the age of 18, entered a different, more active job market, making him less vulnerable to today’s sudden hiring freeze. This is not a like-for-like comparison.

To determine whether recent graduates will have a particularly tough time in the low-employment environment in 2025, we should compare instead with others who have recently entered the labor market for the first time, regardless of age. A recent graduate looking for a job may be in his mid-twenties, but someone entering the world of work straight out of high school will be several years younger.

Once we do that, it turns out that those without a college degree actually have a much harder time. In the United States, unemployment among recent college graduates rose 1.3 percentage points from its lows in mid-2022, but nearly twice that among new entrants to the labor market without a college degree, who saw a rise of 2.4 percentage points. This is very different from the more modest rise of 0.7 points among the frequently – but incongruously – cited group of non-graduates in their mid-20s who are protected from today’s harsh employment conditions.

Applying the same adjustment to the other side of the Atlantic reveals a similar pattern in Western Europe: young workers without college degrees saw unemployment rates rise slightly by 2.4 percentage points on average compared with about 1.4 percentage points for recent graduates.

None of this is intended to highlight the headwinds facing the latest emerging degree groups. But these winds are hitting all young people entering the labor market regardless of education level, and if anything, employment outcomes are deteriorating more quickly for those with lower skills seeking blue-collar jobs than for those seeking high-skilled cognitive work.

Getting this story right is important for two reasons. First, because those with the fewest qualifications are most at risk of slipping into long-term unemployment.

And second, because of what this means for the secondary narratives shaped by this primary narrative. When we think about the force that specifically affects graduates, we look for explanations that apply particularly to managerial jobs early in their careers. Generative AI, for example. But evidence of the kind of widespread AI-led displacement of early-career knowledge-sector jobs, which would explain widespread malaise among graduates, remains conspicuous by its absence.

When we view it instead as a broader labor market slowdown, with inexperienced workers of all stripes bearing the brunt (especially those with the lowest skills), we need not reach for such outlandish explanations. The unraveling of very tight post-pandemic labor markets, rising input costs due to inflation, tax and tariff changes, as well as broader economic uncertainty during Donald Trump’s second term, are enough to explain what we see.

There is no doubt that young people today face a difficult job market, but framing this as uniquely or specifically affecting graduates has muddied the picture rather than clarifying it.

john.burn-murdoch@ft.com, @jburnmurdoch