The Dangerous Economist: AI Is Wrecking an Already Fragile Job Market for College Graduates (is the problem structural Unemployment & the case of a skills mismatch?)

Companies have long leaned on entry-level workers to do grunt work that doubles as on-the-job training. Now ChatGPT and other bots can do many of those chores

By Lindsay Ellis and Katherine Bindley of The WSJ.

There are four types of unemployment: seasonal, structural, frictional and cyclical. Those are explained at the end of the post. But first, the one that might apply here:

Structural Unemployment-unemployment caused by a mismatch between the skills of job seekers and the requirements of available jobs.

One example of this is when you are replaced by a machine. Another example is when there is a fall in demand for your product, so you get laid off, like with typewriters since people now use computers. A third example is geographical, when the jobs are not in your region of the country.

Maybe workers are being replaced by machines. But in the article below, it says that graduates don't have the right skills. That is highlighted in red. Maybe there has been a fall in demand for the services that new graduates can provide.

Excerpts from The WSJ article:

"At Chicago recruiting firm Hirewell, marketing agency clients have all but stopped requesting entry-level staff—young grads once in high demand but whose work is now a “home run” for AI, the firm’s chief growth officer said. Dating app Grindr is hiring more seasoned engineers, forgoing some junior coders straight out of school"
There has been "A yearslong white-collar hiring slump and recession worries"
"With each new class after 2020, an ever-smaller share of graduates is landing jobs that require a bachelor’s degree, according to a Burning Glass Institute analysis of labor data. That’s happening across majors, from visual arts to engineering and mathematics. And unemployment among recent college graduates is now rising faster than for young adults with just high-school or associate degrees."
"the sectors where graduate hiring has slowed the most—like information, finance, insurance and technical services—are still growing, a sign employers are becoming more efficient and see no immediate downside to hiring fewer inexperienced workers"
"Top executives at industry giants including Amazon and JPMorgan have said in recent weeks that they expect their workforces to shrink considerably."
"The overall national unemployment rate is at about 4%, but for new college graduates, it was 6.6% over the past 12 months ending in May."
"among the 15 largest tech companies by market capitalization, the share of entry-level hires relative to total new hires has fallen by 50% since 2019. Recent graduates accounted for just 7% of new hires in 2024, down from 11% in 2022."
"There were 15% fewer job postings to the entry-level job-search platform Handshake this school year than last, while the number of applications per job rose 30%, according to the platform. Internship postings and applications saw similar trend lines between 2023 and 2025."
"workers mostly learn through experience, and then the remainder comes from relationships and development. When AI can produce in seconds a report that previously would have taken a young employee days or weeks—teaching that person critical skills along the way—companies will have to learn to train that person differently."
"Some of the entry-level jobs most at risk are the most lucrative for recent graduates, including on Wall Street and in big law firms where six-figure starting salaries are the norm. But those jobs have also been famously menial for the first few years—until AI came along."
"there’s a gap between the skills companies expect out of their junior hires in the age of AI and what most new graduates are equipped with out of school. An engineer in a first job used to need basic coding abilities: now that same engineer needs to be able to detect vulnerabilities and have the judgment to determine what can be trusted from the AI models."

Below are the four types or causes of unemployment:

1. Seasonal-Unemployment due to seasonal changes in employment or labor supply.

People who work in amusement parks, lifeguards, farm workers, etc. only work during certain seasons. In the off-season, they are unemployed.

2. Frictional-brief periods of unemployment experienced by people moving between jobs or into the labor market.

An example of this is when you move to a new city with your spouse because they got a better job. For a period of time you will be looking and that period without a job you will be unemployed. Another example is the period of time when you are looking for your first job after you graduate from college.

3. Structural-unemployment caused by a mismatch between the skills of job seekers and the requirements of available jobs.

One example of this is when you are replaced by a machine. We don’t have as many bank tellers any more because people use ATMs. Another example is when there is a fall in demand for your product, so you get laid off, like with typewriters since people now use computers. A third example is geographical, when the jobs are not in your region of the country.

4. Cyclical-unemployment caused by a fall in GDP. This comes from the idea of the business cycle. We assume that when GDP falls, the unemployment rate goes up (companies need fewer workers since their sales have fallen). And that when the GDP rises, the unemployment rate goes down.

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Technological Disruption in the Labor Market (2025)

Why AI Might Not Take All Our Jobs—if We Act Quickly (2025)

Some good news on productivity (2025) (AI is mentioned)

Some economics of A.I. (2025)

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Two recent articles on robots and human workers (2024)

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