Gen Z Job Shortage Linked to Fewer Openings, Not AI

A shortage of job openings, rather than a lack of AI skills, is the primary driver of employment struggles for individuals aged 18 to 24, according to new research from the Federal Reserve Bank of St. Louis. Analyzing labor conditions between April 2023 and late 2025, the study found that the unemployment rate for this age group increased by 2.9 percentage points due to overall job scarcity. In contrast, unemployment rose by only 1.1 percentage points as a direct result of employers prioritizing candidates with existing AI skills.

Authors William Rodgers III and Alice Kassens noted in their research that hiring has slowed since April 2023, with young workers and new entrants disproportionately affected by this softening labor market. While AI presents an additional challenge at the point of labor market entry, particularly for recent college graduates, its impact remains less significant than the broader decline in available job openings. The researchers also observed that once overall labor demand was factored in, there was no comparable deterioration in employment for workers aged 25 to 64, highlighting that young and inexperienced workers are typically the first to experience the effects of hiring slowdowns.

The study further revealed that while fewer job openings still had a greater impact on recent graduates than the rising demand for AI skills, the gap between these factors narrowed. The combined effect of fewer job openings and shifting AI demand contributed to an unemployment increase of approximately 2.2 and 1.7 percentage points, respectively. This data suggests that when companies reduce hiring, the youngest and often most eager entry-level workers face the most challenging market conditions. This new data aligns with prior research indicating a trend of shrinking job opportunities for the youngest members of the workforce, a pattern that is now directly affecting teenagers seeking summer employment, as suggested by a May 2026 analysis of Bureau of Labor Statistics data.