There has been a decrease in job openings that require college degrees, hinting towards a white-collar recession. (Credit: Claire Leibowitz)
As college commencement season heads into full swing, the class of 2025 is about to enter the most difficult job market for recent graduates in more than a generation.
The unemployment rate for four-year degree recipients between the ages of 22 and 27 stood at 5.8% in April compared to 4.2% for the overall workforce, according to the U.S. Labor Department. That’s the widest gap since the 1990s, according to a New York Federal Reserve Bank study.
As a new crop of graduates prepare to enter the workforce, there are signs that the employment market is softening, with fewer jobs added last month and consumer confidence sinking. In April, 67% of consumers expected the unemployment rate to increase, the highest level since 2009, according to the University of Michigan Index of Consumer Sentiment.
“The main thing hurting the economy and first-time job seekers more potently than other kinds of workers is the uncertainty,” Robert Nakosteen, an economics professor at Massachusetts Institute of Technology, said in a telephone interview. “Policies have been so erratic.”
President Donald Trump’s erratic tariff policies have made it difficult for businesses to make plans, including for hiring, which negatively impacts recent graduates more than other groups, Nakosteen said.
Economic policy decisions by the new administration are landing amid a stream of recent job market research that paints a darkening picture of employment prospects for the college class of 2025.
With businesses reluctant to add new positions, recent graduates have to pursue positions that are being vacated for some reason and may have higher qualification requirements. According to a LinkedIn analysis, 35% of “entry-level” jobs now require three years of work experience.
What positions are available may offer less pay. According to ZipRecruiter, a Santa Monica, Calif.-based online job marketplace, 48% of employers say they have cut compensation in recent years, a trend most pronounced among small- and medium-sized companies.
The market that workers are encountering in their first real job search has both short- and long-term negative effects, Nakosteen said, including the difficulty in the search and taking jobs with lower pay or qualifications. “The damage has been done,” he said.
The Burning Glass Institute, a Bala Cynwyd, Pa.-based research group that tracks the job market, compared online career histories of tens of millions of graduates with census data. In a study published in February, it found that 52% of college graduates are underemployed a year after graduation and 45% remain underemployed a decade later. Graduates who majored in science, technology, engineering or math or related fields fared the best, while those with degrees in other majors like marketing and general business struggled.
Recent research by ADP, the Roseland, N.J.-based provider of human resources services, points to a white-collar recession, or a decrease in employment opportunities that require college degrees. Annual growth in hiring workers with bachelor’s degrees or higher was 1.4% in January 2024 compared to 2.9% for candidates with only high school diplomas and 4% for job-seekers with some high school experience or GEDs.
Given the uncertainty in the job market, networking and informational interviews become even more important because half of all available jobs are not published online, Amanda Augustine, a New York-based career coach, said. “A first job is not the last job,” she said. “It’s the first step in a very long career.”
Many new degree recipients have different ambitions. Monster, a job listing company, this year surveyed 1,000 new and impending college graduates in the U.S. and found that 20% of the post-college job candidates feel overqualified for entry-level positions. Over half – 54% – said they would reject a job that lacks advancement opportunities and 35% would turn down a job at a company without diverse leadership.
The difficulty of getting a start, dissatisfaction with prospective employers, or simple ambition is sending some young people down an alternate path. In 2022, Intelligent, an online magazine that caters to job-seekers and students, tracked members of that year’s college graduating class and found that 17% of the graduates were running their own businesses, and 43% planned to do the same.
Among people of all ages, starting a business is increasingly attractive. Small business applications increased to 452,255 in March, up 6.4% from the previous month, according to U.S. Census data.
The service side of the economy remains strong, according to Allen Sinai, chief global economist at Decision Economics Inc. “Those graduating are still having a hard time. It’s permanent,” Sinai says. “But [service] jobs are resilient.”
Service jobs make up 79% of the U.S. economy, according to Statista, a global business data company based in Hamburg, Germany. About half of job-seeking graduates will take service jobs of all types, some high end and some lower skilled. This contributes to the underemployment and low confidence in the job market, especially for first-time workers.
Uncertainty is common throughout the economic cycle and will continue to color the employment picture, Sinai said. “It’s the world,” he said. “We’re going to go through ups and downs and lots of abuses. Our country and the world will sort it out.”
About the author(s)
Claire Leibowitz is an M.S. student at Columbia Journalism School covering business, climate and politics.