The Fed Can’t Save Young Tech Workers from Job Struggles
Hundreds of thousands of young Americans, newly graduated with a computer science degree, have faced significant challenges in securing employment over the past year. And their fortune may not shift in the near future. The Federal Reserve initiated a reduction in interest rates last month to bolster the labor market and is anticipated to implement another rate cut in the near future. Companies across various sectors, including technology, have slowed down their hiring processes this year, cautious about making such investments without a clear understanding of the full impact of President Donald Trump’s extensive economic policies. A series of rate cuts is expected to enhance hiring by facilitating the expansion of company workforces. However, reduced rates cannot readily mitigate the economic uncertainty that persistently troubles businesses or tackle the structural effects of AI on entry-level tech positions. “Layoffs and reductions in hiring plans due to AI use are expected to increase, especially for workers with a college degree,” Fed Governor Christopher Waller stated during an event. “For policymakers, we must let the disruption occur and trust that the long-run benefits will exceed any short-run costs,” he stated.
Rate cuts do not address the larger problem concerning hiring. Typically, lower interest rates incentivize companies to increase their staffing levels. However, companies require clear insights into future expenses as they formulate their hiring strategies, a daunting endeavor in light of Trump’s persistent efforts to redefine global trade. “The labor market has been frozen up because people are just having a hard time making decisions,” Laura Ullrich. “So long as economic uncertainty is high, it’s hard to know how many people you should hire.” The situation has shown some signs of stabilization since the spring when Trump announced his extensive Liberation Day tariffs. The Trump administration has declared several successful trade agreements since that time, yet Trump’s trade war remains unresolved. On Thursday, the president canceled trade discussions with Canada following the airing of an anti-tariff advertisement by the province of Ontario. Trump has criticized China for its limitations on rare earth exports, and his administration is initiating an investigation to determine if China has adhered to a trade agreement established in 2019. Trump is anticipated to engage in a comprehensive dialogue with his Chinese counterpart Xi Jinping during an upcoming meeting in South Korea. Currently, businesses of all sizes and across various industries remain uncertain about the future as US trade policy continues to change, even with expectations that the Fed will implement further rate cuts through 2026.
“There’s still policy uncertainty, but everyone realizes substantial tariffs are now most likely here to stay. And now we have to navigate it,” Rich Lesser remarked in an analysis. A survey released on October 16 revealed that their expectations for the economy in the next six months “turned from neutral to pessimistic,” with 68% indicating plans to maintain or reduce the size of their workforce. AI is starting to take over certain tasks typically performed by entry-level technology workers, which may lead to a significant change in the labor market of the technology industry. Tech companies are increasingly embracing the technology; a Google study from September revealed that 90% of tech workers are utilizing AI in their workplaces. The Fed’s key interest rate, which influences borrowing costs more broadly, operates through demand, not supply. That indicates it effectively enhances demand to support the labor market, which is presently the objective of the central bank; however, it fails to address supply-side challenges. “You do have a bit of a mismatch,” stated David Seif. “You have a lot of people who are new (computer science) graduates from college, but there doesn’t seem to be enough demand for these entry-level workers.”
In early October, job postings in the technology and mathematics industry on Indeed experienced a significant decrease of 35% compared to February 2020, with particular roles, including developers and designers, facing the most pronounced declines. During this period, there has been a significant surge in job postings for roles centered around AI and data centers. “Higher unemployment among recent college graduates is primarily a function of a structural shift in hiring in the tech sector amid strong labor supply growth,” Matthew Martin wrote in an analyst note. “Computer and mathematical science occupations are disproportionately exposed to automation and displacement,” he added. A survey revealed that a majority of the business leaders surveyed anticipate AI “to fundamentally transform over 50% of the job roles in their organization in the next 5 years.” Young Americans who pursued computer science for the allure of lucrative employment are now facing the challenging economic realities brought about by a new, disruptive technology. “It feels like I’m competing with AI to just try to get my foot in the door,” Abraham Rubio remarked.
