Grad market tightens

Young college graduates are landing in a weaker job market even as employers say they cannot find enough people who can use artificial intelligence at work. (bloomberg.com) The Federal Reserve Bank of New York said the underemployment rate for recent college graduates rose to 42.5 percent in the fourth quarter of 2025, the highest since 2020, while unemployment climbed to about 5.7 percent. Bloomberg reported that nearly 43 percent of young United States graduates are working in jobs that typically do not require a degree. (newyorkfed.org) (bloomberg.com) At the same time, Pearson and Amazon Web Services said in research released April 13 that 53 percent of employers see finding graduates with the right artificial intelligence skills as their main hiring problem. The same study found only 14 percent of current graduates said they had a high level of skill using artificial intelligence tools in a professional workflow. (prnewswire.com) (pearson.com) That mismatch is showing up as hiring slows at the entry level. The National Association of Colleges and Employers said in its spring update that employers now expect to hire less than 1 percent more graduates from the Class of 2025 than they hired from the Class of 2024, down from a 7.3 percent increase forecast earlier in the year. (naceweb.org 1) (naceweb.org 2) Employers and colleges do not agree on how prepared students are. Pearson and Amazon Web Services found 78 percent of higher education leaders believe they are meeting employer expectations, even as employers reported difficulty finding graduates ready to apply artificial intelligence on the job. (prnewswire.com) (pearson.com) Underemployment means working in roles that usually do not need a four-year degree, such as jobs with lower skill requirements or limited career progression. The New York Fed’s tracker shows that recent graduates’ underemployment rate is now above its pre-pandemic range after worsening through late 2025. (newyorkfed.org) The pressure has been building for months. Bloomberg reported in June 2025 that the Class of 2025 was entering the worst entry-level market in years as companies froze hiring and artificial intelligence began to absorb some lower-skill tasks. (bloomberg.com) Pearson said the problem is less about access to artificial intelligence tools than about using them in real work, such as research, writing, analysis, and decision-making inside a job. Its report calls that gap a breakdown at the point where classroom learning is supposed to turn into workplace capability. (pearson.com) For graduates, that leaves two tests at once: finding an opening in a slow market and proving they can use artificial intelligence in ways employers will pay for. The latest data suggests many are still clearing neither bar. (newyorkfed.org) (prnewswire.com)