AI Not to Blame for Youth Unemployment Crisis

Young people entering the job market are encountering unprecedented challenges, but artificial intelligence (AI) is not the culprit. A recent analysis from the London-based consultancy Global Data.TS Lombard indicates that the primary issue lies with companies not hiring, rather than technological displacement.

Youth Unemployment Trends

Since the beginning of 2023, unemployment rates among new entrants to the U.S. labor market have surged over 2.5 percentage points. In contrast, older workers have maintained stable jobless rates. Dario Perkins, managing director at Global Data, highlights this discrepancy as part of a broader trend of weak hiring across the economy.

Analysis of Hiring Practices

Perkins argues against the notion that AI is directly causing job losses for young graduates. Instead, he identifies several traditional factors contributing to the hiring downturn:

• Post-Pandemic Normalization: Companies expanded their workforces significantly following the pandemic but are now adjusting headcounts.
• Policy Uncertainty: Businesses are hesitant to hire due to ambiguous policy environments.
• Profit Margin Pressures: Tariffs from the Trump administration have constrained profits, pushing firms to maximize output from current employees rather than hiring new staff.

Future Job Outlook

Despite the current challenges, Perkins emphasizes optimism for the future. He suggests that employment prospects for young people will improve with a rebound in hiring as the economy accelerates. “When hiring rates recover, new entrants’ employment prospects should also improve,” he asserts.

Impact on Young Tech Workers

While the overall job market remains stagnant for younger workers, specific sectors are experiencing heightened difficulties. A report from Goldman Sachs indicates that unemployment rates for tech workers aged 20 to 30 have increased by nearly 3 percentage points since early 2024. This rise is more than four times that of the overall jobless rate.

In an October report, Goldman Sachs cautioned about a potential era of “jobless growth” in the United States, attributing this concern to advancements in AI despite the overall economy maintaining strength.

In summary, while youth unemployment presents significant challenges, the causes are rooted in conventional economic factors and not merely a result of AI integration. The job market for young individuals may brighten as hiring practices evolve in the future.