Young people aren't getting hired — but AI isn't to blame, an economist says

• Young people face a tough job market, but AI isn't the main culprit, an economist says.
• Hiring has stalled after post-pandemic overexpansion, policy uncertainty, and tariffs.
• Sectors most exposed to AI aren't losing more jobs, suggesting deeper economic issues.

Young people entering the job market are facing the toughest conditions in years — but artificial intelligence isn't the reason.

A new analysis from a London-based economics consultancy suggests something much more old-fashioned is going on: Companies simply aren't hiring.

Since 2023, unemployment among new entrants to the US labor force has jumped more than 2.5 percentage points — a sharp contrast with older workers, whose jobless rates have remained flat, according to the analysis from Dario Perkins, a managing director at Global Data.TS Lombard.

"For the AI maximalists, this is 'proof' that companies are deploying the technology rather than hiring graduates. And it is also consistent with what business leaders are saying, with 'AI' now a synonym for 'cost cutting,'" wrote Perkins.

But Perkins argues the real reason is simply the normal course of business.

"US hiring is weak across the board. In fact, the economy as a whole is currently experiencing recessionary levels of job creation," he wrote.

Perkins' analysis shows that sectors with higher AI exposure are not experiencing larger increases in unemployment.

The report identifies three main drivers behind the hiring slowdown — and none involve automation replacing workers.

First, firms rapidly expanded their workforces during the post-pandemic surge and are now normalizing head count.

Second, policy uncertainty has made businesses cautious about taking on new staff.

Third, Trump-era tariffs have squeezed profit margins, prompting companies to push for more output from existing employees instead of hiring new ones.

This leaves young people getting squeezed, but the good news is that net employment is stable.

The job outlook should improve once hiring rebounds, Perkins wrote.

"When the economy reaccelerates and hiring rates recover, new entrants' employment prospects should improve," he wrote.

Perkins' report came as markets continue to assess the impact of AI technology on the economy and employment.

Other analysts have concluded that young tech workers seem to be taking the brunt of the impact. The unemployment rate for 20- to 30-year-olds in tech has risen by nearly 3 percentage points since early 2024, over four times the increase in the overall jobless rate, according to Goldman Sachs in an August report.

In October, Goldman warned of an era of "jobless growth" in the US due to AI, even as the broader economy remains strong.