The job market for young people is brutal, but is AI to blame? The release of ChatGPT in late 2022 has led many to believe that AI is displacing entry-level white-collar professionals, causing a surge in unemployment among recent college graduates. However, this narrative is flawed. The data suggests that the rise in unemployment among young people has more to do with statistical anomalies and broader economic trends than AI. The unemployment rate for recent college graduates has risen twice as fast as the overall unemployment rate, but this is due to a significant number of young workers without college degrees giving up on job searches, artificially inflating the unemployment rate. This is similar to students not showing up for standardized tests. The gap between recent graduates and young people without degrees has also narrowed, indicating a longer-term story about supply and demand. The number of graduates competing for jobs has increased, while the skill level of the average graduate has fallen, mirroring the situation with high school diplomas decades ago. The share of online job postings seeking college-educated workers has declined, possibly due to the widespread use of digital technologies. Moreover, workers at the highest risk of AI displacement are not experiencing the worst outcomes. In fact, AI might be increasing employment for college-educated workers. The slowdown in hiring, known as the 'big freeze', began in mid-2022 and is attributed to uncertainty about the economy, the election, and inflation. AI companies are unveiling new agents, but the weak labor market is not comforting. The experts are still unsure why young people have struggled, and the data is too complex to make definitive predictions about AI's impact. The labor market's mysteriousness should make us cautious about making big, scary predictions about AI's future.
