Grads: 43% Underemployed

Nearly 43% of recent United States college graduates are working in jobs that do not typically require a degree, the highest underemployment rate since 2020. (newyorkfed.org) The Federal Reserve Bank of New York said the underemployment rate for recent graduates rose to 42.5% in the fourth quarter of 2025, up from 41.8% in the third quarter, while unemployment climbed to about 5.7% from 5.3%. (newyorkfed.org) Bloomberg reported on April 13 that the squeeze is hitting young graduates as employers slow hiring and use artificial intelligence tools to do more routine entry-level work with fewer people. (bloomberg.com) The broader labor market had already cooled in 2025. The Federal Reserve Bank of St. Louis said payroll growth averaged 35,000 jobs over the prior three months in July 2025, far below earlier gains, while the national unemployment rate ticked up to 4.2%. (stlouisfed.org) That slowdown has hit new graduates harder than other groups. The St. Louis Fed found unemployment for college graduates ages 23 to 27 averaged 4.59% in 2025, up from 3.25% in 2019, compared with a 0.47 percentage point increase for young workers without a bachelor’s degree. (stlouisfed.org) Employers are also not signaling a big rebound for the class behind them. The National Association of Colleges and Employers said in its Job Outlook 2026 report that hiring for Class of 2026 graduates is projected to rise just 1.6%, and 45% of employers rated the market for those graduates as only “fair.” (naceweb.org) In tech, one of the biggest entry ramps for degree holders has narrowed sharply. SignalFire said Big Tech new-graduate hiring fell 25% in 2024 from 2023 and is down more than 50% from 2019, while startup new-graduate hiring fell 11% from 2023. (signalfire.com) Economists have been tracking a longer erosion in the edge a degree once gave young workers. A November 2025 Cleveland Fed commentary said the unemployment gap between young college graduates and young high school graduates had fallen to its lowest level since the late 1970s as the job-finding rate for young college graduates declined over time. (clevelandfed.org) The New York Fed still says college remains a good investment over a career, even with a rough start, and notes that many underemployed graduates move into better jobs after gaining experience. For the class entering the market now, that payoff is taking longer to show up. (newyorkfed.org)