Millions of college graduates are entering a job market where unemployment for new degree holders has climbed to levels rarely seen outside a recession, drawing fresh scrutiny in research from a New York Fed economist and two university economists.
Much of the public debate has focused on artificial intelligence as the force behind vanishing entry-level positions across white-collar industries.
New research from the Federal Reserve Bank of New York, however, points in a different direction for the employment struggles facing today’s youngest workers.
The findings trace the hiring slowdown for inexperienced workers back to a workplace shift that predates the rise of generative AI tools.
How remote work explains most of the increase in youth unemployment
The Federal Reserve Bank of New York published its analysis on June 1, 2026, in a Liberty Street Economics blog post by three economists.
New York Fed researcher Natalia Emanuel co-authored the study with Emma Harrington of the University of Virginia and Amanda Pallais of Harvard.
The researchers estimated that remote work can explain 64% of the increase in unemployment among young college graduates, CNBC reported, a finding that reframes the national conversation around entry-level hiring.
In remote occupations such as software engineering, unemployment among graduates under 29 rose by almost 1 percentage point between 2017-2019 and 2022-2024, the study found.
Older workers in those same fields saw their jobless rate marginally decline over the period, widening the generational gap.
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Non-remotable occupations, such as mechanical engineering, exhibited a markedly different pattern over the same time frames examined by the study.
The age gap in unemployment for those in-person roles briefly spiked during 2020 but returned to its previous baseline shortly afterward, the study found.
The researchers point to on-the-job learning as the channel. Junior staff in remote roles miss the desk-side feedback, shadowing, and informal coaching that build early-career skills, leaving managers less willing to bet on candidates who need hands-on training to grow into the role.
Young college graduates face higher unemployment than experienced workers
Unemployment among college graduates younger than 29 averaged 3.1% from 2017 through 2019 and climbed 20% to reach 3.7% from 2022 through 2025, the study found.
The unemployment rate for experienced college graduates with established careers, in contrast, fell from 1.9% to 1.8% during those same periods, the researchers noted.
For young people early in their career, unemployment can be particularly harsh… They have had less time to pull together a reasonable amount of emergency savings and are far more likely to carry college debt.
The divergence has created a two-track labor market in which entry-level degree holders face a deteriorating outlook in ways their more seasoned counterparts do not.
Entering the labor market in a downturn can produce “scarring” effects on earnings and career progression that persist for years, according to research cited in the New York Fed analysis.
New York Fed data challenges popular AI explanation for job losses
The study found that the timing of rising youth unemployment does not align with the widespread adoption of generative AI tools, complicating the explanation that has dominated headlines in finance, law, media, and technology.
Even after the authors controlled for each occupation’s exposure to AI capabilities, the larger unemployment gap in remote jobs remained, while non-remote occupations continued to show no widening generational gap.
Proprietary data from an unnamed Fortune 500 company reinforced the finding, showing that physical distance between colleagues weakens professional development for newer hires, the authors wrote in the Liberty Street Economics post.
Workers near their teammates received substantially more feedback and mentoring, and the firm hired fewer junior employees while its offices were closed.
What the New York Fed’s remote work findings signal for young workers
Remote arrangements have expanded fourfold since the pandemic, and the researchers identified a structural shift in how companies approach hiring for entry-level positions.
A Gallup survey of remote-capable U.S. employees conducted in May 2025 found that 71% of Gen Z workers prefer hybrid arrangements, while only 6% prefer fully on-site roles. These are the same flexible arrangements the NY Fed analysis links to weaker employment outcomes for new graduates.
The gap between workers’ preferences and employers’ training needs shows no sign of easing, with Gallup data and the NY Fed analysis pointing in opposite directions.
The NY Fed researchers concluded that remote work has weakened employers’ incentives to hire young workers by impeding on-the-job training, a dynamic that may weigh on hiring outcomes for the class of 2026, regardless of individual preferences.
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