As current school graduates face one of many hardest job markets in years, Berkeley economist and voluble Substacker Brad DeLong has a message for these struggling to land their first full-time gig: Synthetic intelligence (AI) and automation are to not blame. Bigger forces are at work.
DeLong, a professor at UC Berkeley and former Deputy Assistant Secretary of the Treasury, argued in a current essay that the challenges confronting younger job-seekers immediately are primarily pushed by widespread coverage uncertainty and a sluggish financial system—not by the speedy rise of AI instruments like ChatGPT or data-crunching robots. DeLong provided his evaluation on July 23, roughly 10 days earlier than the July jobs report shocked markets, revealing that the financial system has been a lot weaker than beforehand thought for a number of months.
Outstanding enterprise leaders had additionally flagged troubling indicators within the financial system earlier than the July jobs report dropped. IBM Vice Chair and former Trump advisor Gary Cohn went on CNBC a day earlier than the roles information, noting “warning indicators under the floor.” Cohn stated he pays shut consideration to the quits price within the month-to-month JOLTS information, arguing that 150,000 fewer quits was an ominous signal of poor financial well being.
DeLong sounded a prophetic observe, writing that “coverage uncertainty” over commerce, immigration, inflation, and expertise has “paralyzed enterprise planning,” resulting in a self-reinforcing cycle of hiring freezes. New entrants to the job market are bearing the brunt of the retreat to threat aversion. In different phrases, the school graduate class of 2025 is absolutely unfortunate.
The economist argued that the uncertainty causes corporations to delay main selections—together with hiring—within the face of an unpredictable coverage surroundings.
“This threat aversion is especially damaging for these firstly of their careers, who depend on a gentle movement of entry-level openings to get a foot within the door,” he wrote.
DeLong has sounded related warnings of a slowdown for years. He talked to Fortune in 2022 about his principle of the financial system beginning to sputter from his e-book Slouching In the direction of Utopia. In 2025, he wrote, the large story within the jobs market shouldn’t be truly AI, however one thing completely different.
Coverage paralysis
So, what’s actually maintaining freshly minted graduates from clinching that all-important first job? DeLong cited Bloomberg BusinessWeek’s Amanda Mull and her principle about “stochastic uncertainty”—a cocktail of unpredictability round authorities insurance policies, commerce, immigration, and inflation. Corporations aren’t firing; as an alternative, they’re simply ready. And plenty of are delaying new hires in anticipation of doable sudden shifts in tariffs, inflation charges, and regulatory environments. The result’s a wait-and-see local weather the place employers, apprehensive about future financial shocks, have chosen warning over growth. The holding sample hits new entrants to the workforce particularly laborious.
Whereas general unemployment within the U.S. stays low, the scenario is uniquely troublesome for brand new graduates relative to the remainder of the workforce. Citing economists together with Paul Krugman, DeLong famous that whereas absolutely the unemployment price for school graduates isn’t alarming, the hole between graduate unemployment and normal unemployment charges is at report highs. Up to now, greater training reliably led to decrease unemployment, however now current grads are struggling “by a big margin” in comparison with earlier generations.
As beforehand reported by Fortune Intelligence, Goldman Sachs has argued that the school diploma “security premium” is usually gone. The crew, led by Goldman’s chief economist Jan Hatzius, wrote: “Latest information means that the labor marketplace for current school graduates has weakened at a time when the broader labor market has appeared wholesome.”
It additionally discovered that since 1997, younger staff with no school diploma have turn out to be a lot much less prone to even search for work, with their participation price dropping by seven share factors.
Goldman Sachs
Mull cited an evaluation by the Federal Reserve Financial institution of New York which discovered that tech and design fields, together with laptop science, laptop engineering, and graphic design, are seeing unemployment charges above 7% for brand new graduates.
Why the AI hype misses the mark
Though the tech sector is buzzing about AI’s potential to switch junior analysts or automate entry-level duties, DeLong urged warning in assigning blame. In his typical fashion, he famous, “there may be nonetheless [no] laborious and never even a semi-convincing gentle narrative that ‘AI is accountable’ for entry-level job shortage.” Hiring slowdowns, he identified, are pushed by broader financial forces: uncertainty, threat aversion, and adjustments in how corporations make investments.
Right here once more, DeLong’s evaluation rhymes and aligns with current analysis from Goldman’s Hatzius. The financial institution’s quarterly “AI Adoption Tracker,” issued in July, discovered that the unemployment price for AI-exposed occupations had reconciled with the broader financial system, which contradicts fears of mass displacement. Additionally they famous there have been no current layoff bulletins explicitly citing AI because the trigger, underscoring that it’s contained to disruption of particular capabilities, not whole industries.
Goldman Sachs
Crucially, he argued, slightly than hiring individuals, corporations within the tech sector are splurging on “the {hardware} that powers synthetic intelligence”—notably Nvidia’s high-performance chips—fueling a growth in capital funding whereas sidelining junior hires.
“For corporations, the calculus is simple: Investing in AI infrastructure is seen as a ticket to future competitiveness, whereas hiring junior workers is a price that may be postponed.”
Underpinning these developments is a shift away from any and all threat. Employers want to rent for particular short-term wants and are much less prepared to spend money on creating new expertise—leaving younger candidates caught in a cycle the place “simply getting your foot within the door” is harder than ever. Incumbent staff, apprehensive about job market uncertainty, are much less prone to change jobs, resulting in fewer openings and larger stagnation.
DeLong’s evaluation harmonized with Goldman Sachs’ findings in regards to the declining premium hooked up with a university diploma:
“For the longer-run, the rise within the school wage premium is over, and a decline has (most likely) begun.”
For many years, he continued, a university diploma was a ticket to greater earnings, and the labor market rewarded these with superior expertise and credentials. Lately, although, “this has plateaued and will even be falling.” The causes are advanced, he added, however the takeaway: Whereas levels stay useful, they’re not the ever-ascending ticket to prosperity they as soon as had been.
These feedback affirm the gloomy remarks of College of Connecticut professor emeritus Peter Turchin, who just lately talked with Fortune in regards to the declining standing of the higher center class in twenty first century America. When requested the place else he sees this manifesting in trendy life, Turchin stated, “It’s truly all over the place you look.
“Take a look at the overproduction of college levels,” he stated, arguing that the lowering premium that Goldman and DeLong write about reveals up in declining charges of faculty enrollment and excessive charges of current graduate unemployment. “There may be overproduction of college levels and the worth of a college diploma truly declines.”
DeLong’s backside line for current grads: Blame a risk-averse enterprise local weather, not expertise, for immediately’s job woes. And now that we all know the financial system could have been far more risk-averse in 2025 than beforehand, DeLong’s warnings are price revisiting.
DeLong didn’t reply to a request for remark.
For this story, Fortune used generative AI to assist with an preliminary draft. An editor verified the accuracy of the data earlier than publishing.
