The US labour market debate is divided. Ask consumers and they’ll tell you hiring conditions are the worst since the mid-2010s (ex-pandemic). Ask the initial claims data and you’d conclude companies won’t let anyone go. Today the Fed’s Barkin reiterated that it’s a low-hire, low-fire economy.
Zoom out and the pain is concentrated in one place: people trying to get their first real job.
National Bank’s Jocelyn Paquet flags it in this week’s Hot Chart. The unemployment rate for recent graduates is running at 5.7% versus 4.1% for all workers. That might not sound dramatic until you consider the history: from 1990 through 2020, recent grads consistently enjoyed better job prospects than the workforce as a whole. That relationship flipped after the pandemic and the gap has widened ever since.
So what happened? Paquet points to two suspects. The first is boring but probably does most of the work: companies over-hired in the post-pandemic scramble and simply don’t need young bodies right now. The second is artificial intelligence. The technology is particularly good at automating exactly the tasks that used to be handed to 23-year-olds in white-collar jobs, and it’s not a stretch to think some companies have quietly dialled back campus recruiting because of it.
To NBF’s credit, they don’t overreach. The deterioration in grad job prospects started before ChatGPT launched in November 2022, so AI can’t be the whole story. But it can be an accelerant, and the timing of the widening gap is worrisome.
Here’s the part that matters for markets: historically, businesses slow hiring before they start cutting. NBF sits in the optimist camp on the broader labour market and I lean that way too, but this is the series I’d watch for the first crack and today’s non-farm payrolls report wasn’t encouraging.
For the Fed, it’s another data point arguing the labour market is weaker than the headline suggests. Looking at housing, inflation and the labor market, you can’t help but be worried for the next generation. Maybe we should stop bombarding them with sports-gambling ads?
