Jerome Powell and Economists Agree: Gen Z Faces a Hiring Crisis And That's Not About AI
News Summary
In 2025, the rising unemployment rate among Americans under 25, particularly recent graduates, has emerged as a significant economic concern. Federal Reserve Chair Jerome Powell, along with economists from Goldman Sachs and UBS, agree that this issue stems from a “no hire, no fire” economic environment rather than the impact of artificial intelligence (AI). This problem is considered uniquely American. Powell highlighted that young college graduates, minorities, and younger people are struggling more to find jobs, underscoring a low job finding rate and redundancy rate, indicative of a “low firing, low hiring environment.” UBS chief economist Paul Donovan and Goldman Sachs economist Pierfrancesco Mei support this perspective, attributing the problem to a broader hiring freeze unique to the U.S. labor market, with job reallocation declining since the late 1990s. The article also notes that less educated workers are less impacted, with high school dropouts securing full-time employment at a younger age than recent graduates, indicating a shift towards trade employment. Experts warn of lasting damage to earnings, homeownership prospects, and wealth accumulation for Gen Z and minority jobseekers. Additionally, Powell mentioned that stricter immigration measures are decreasing the labor supply, further intensifying the problem.
Background
In 2025, the U.S. economy is experiencing a unique “no hire, no fire” period, presenting significant challenges for the labor market, particularly for young jobseekers, recent graduates, and minority groups. This pattern implies that while companies are reluctant to conduct large-scale layoffs, they are also simultaneously restricting the hiring of new employees. This trend contrasts with situations in other global regions, suggesting structural rather than purely cyclical issues within the U.S. labor market. Under President Donald Trump's administration, stricter immigration policies have directly impacted labor supply, further complicating employment dynamics, especially for sectors that rely on a steady influx of workers.
In-Depth AI Insights
What are the underlying structural issues contributing to the 'no hire, no fire' economy for Gen Z, beyond cyclical slowdowns? - The sustained decline in job reallocation and churn since the late 1990s has led to a more rigid labor market, disadvantaging new entrants. - Corporations may prioritize experienced hires, reducing investment in training new graduates and their risk appetite, exacerbating skill mismatch issues. - The Trump administration's stringent immigration policies, while reducing overall labor supply, may paradoxically intensify competition for entry-level roles as employers may favor more established workers from a limited pool. How might the persistent youth unemployment crisis influence long-term economic policy and market dynamics under the Trump administration? - Rising youth unemployment will exert significant political pressure on the Trump administration, potentially prompting more domestic-labor-centric protectionist policies, such as further tariffs or 'America First' job initiatives. - Delayed wealth accumulation for Gen Z will have long-term implications for consumer spending, the housing market, and overall economic growth, potentially leading to a subdued recovery. - Over time, heightened social discontent could emerge, potentially leading to social instability that impacts investor confidence and market stability. What are the specific investment implications for different sectors given this unique U.S. labor market dynamic? - Defensive consumer staples and necessities sectors: With Gen Z's impaired earnings and wealth accumulation, consumer spending may shift towards value-for-money necessities, benefiting these sectors. - Vocational training and blue-collar service industries: The article notes less educated workers are less impacted and trending towards trade employment, signaling potential increased investment in vocational skills training and blue-collar services (e.g., construction, maintenance). - Real estate market: Impaired homeownership prospects for Gen Z will exert long-term pressure on the entry-level housing market, potentially reducing first-time buyer numbers. - Technology sector (AI): While AI is not the primary cause of the current youth employment crisis, in the long run, if AI boosts corporate efficiency and thus reduces the need for entry-level labor, it will further reshape the labor structure, benefiting companies offering high-value AI solutions.