AI is already wiping out jobs, intensifying a hiring slowdown

A slowdown in tech hiring, exacerbated by the rise of AI and uncertainty surrounding potential tariffs, is disproportionately impacting recent college graduates, reversing a decades-long trend. The unemployment rate for recent grads (22-27) has risen from 3.9% to 5.8% between April 2022 and March 2025, now exceeding the overall unemployment rate, as AI increasingly handles entry-level software development and administrative tasks, leading to layoffs and fewer opportunities for new graduates. While the long-term effects of AI on job creation remain uncertain, companies are currently hesitant to hire, focusing instead on cost efficiency through AI implementation.

Analysis

The labor market, particularly within the technology sector, is experiencing a significant shift characterized by a hiring slowdown for recent college graduates, a trend intensified by the increasing adoption of Artificial Intelligence. Data from April 2022 to March 2025 reveals a stark rise in the unemployment rate for individuals aged 22 to 27, from 3.9% to 5.8%, surpassing the overall worker unemployment rate which climbed from 3.7% to 4%. This development reverses a decades-long pattern where recent graduate unemployment was typically lower. Oxford Economics attributes this to AI replacing entry-level positions, with IT employment among the 22-27 age group declining by 8% since 2022, while rising 0.8% for college graduates older than 27 in the same field. Concurrently, job openings in the broader professional and business services sector, which includes computer positions, have fallen by approximately 1 million to 1.5 million over the past two years. This youth employment struggle accounts for 12% of the recent increase in the national unemployment rate from 3.6% to 4.2%. Companies like Microsoft, which announced 6,000 layoffs and noted AI writes about 30% of its code, alongside Google and Salesforce, are implementing AI while also reducing headcount, indicating a strategic pivot towards cost efficiency. This trend is compounded by economic uncertainties, including potential tariffs expected to reignite inflation and dampen consumer spending, further curtailing job growth, which is anticipated to slow to 125,000 new jobs in May, down from a recent average of 181,000. While new technologies historically create new roles, the rapid advancement of AI presents an unprecedented situation with uncertain long-term employment outcomes, potentially automating up to 30% of currently worked hours in the U.S. by 2030 according to McKinsey.

Key Decisions for Investors

• Investors in technology companies such as Microsoft (MSFT), Alphabet (GOOGL, GOOG), and Salesforce (CRM) should carefully monitor the balance between AI-driven productivity gains and potential negative impacts from a shrinking entry-level talent pool and increased scrutiny over job displacement.
• Staffing firms like ManpowerGroup (MAN) may face headwinds from reduced entry-level tech hiring, although demand for specialized AI roles and reskilling services could present new avenues for growth.
• Closely observe macroeconomic indicators, as the confluence of AI-led labor market restructuring, particularly affecting young workers, and trade policy uncertainties like tariffs, could negatively impact consumer sentiment and overall economic expansion.
• Evaluate corporate strategies regarding AI integration and workforce adaptation, as companies that proactively retrain employees for higher-value, AI-complementary roles may exhibit greater resilience and competitive positioning in this evolving landscape.