Analysis finds economic environment is shutting young adults out of entry-level jobs
Research from the Federal Reserve Bank of St. Louis shows that from April 2023, when the U.S. labor market was at its strongest, to December 2025, the employment rate for people aged 18 to 24 fell by more than 2 percentage points, mainly reflected in a rise in unemployment, while employment for those aged 25 to 64 remained largely stable. The rise in demand for AI skills is partly responsible, accounting for about one-third of the increase in unemployment among young people.
Briefing at a Glance
- Researchers at the Federal Reserve Bank of St. Louis point out that the overall decline in job openings, combined with rising demand for AI-related skills, is worsening employment opportunities for young adults aged 18 to 24.
- In a report released on June 30, researchers William Rodgers III and Alice Cassens stated that from April 2023 (when the U.S. labor market was strongest) to December 2025, the employment rate for people aged 18 to 24 fell by more than 2 percentage points. The authors noted that this decline mainly reflects a rise in unemployment rather than workers leaving the labor force, indicating that young workers are still seeking jobs but finding fewer opportunities.
- By contrast, employment outcomes for workers aged 25 to 64 remained largely stable, with no similar decline.
Deep Dive
Rodgers and Cassens point out that the decline in job opportunities for young workers is consistent with a "low-hiring, low-firing" economic model, in which companies retain existing employees but scale back recruitment.
They wrote that the impact of AI is "narrow, early, and age-specific." The two economists explained that the technology "raises the bar for young workers trying to gain their first foothold in the labor market, an area where employers feel less need to post job ads, extend offers, and hire." They said that about one-third of the rise in unemployment among workers aged 18 to 24 can be attributed to increased demand for AI job skills.
In their research, Rodgers and Cassens analyzed labor force participation data from the Current Population Survey, conducted jointly by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics. To gauge overall labor demand, they examined the Bureau of Labor Statistics' Job Openings and Labor Turnover Survey.
The two economists also analyzed detailed job posting data to determine demand for AI work. They classified job postings requiring skills in areas such as generative AI, machine learning, and neural networks as AI jobs. The data reflects changes in job content (the skills and tasks listed in postings), "rather than whether firms are using AI to automate work or screen applicants," Rodgers and Cassens clarified.
Since OpenAI launched ChatGPT in late 2022 and generative AI became widespread, employment among early-career workers has declined significantly in the most AI-exposed fields, such as software engineering and customer service, according to a 2025 Stanford University study.
Remote work may also be a factor, especially among recent college graduates, researchers at the Federal Reserve Bank of New York have found. According to their analysis, unemployment among young workers rose by 1 percentage point in jobs that can be done remotely, while unemployment among older workers in these roles fell slightly.
However, the researchers also found that young workers fared better in occupations that cannot be performed remotely. Hiring patterns at a Fortune 500 company suggest that the firm "is willing to teach junior workers when proximity is feasible, but avoids hiring inexperienced workers when distance creates barriers to training and development," the researchers said.