Labor Market Slowdown: Young Grads Feel the Squeeze
With the Federal Reserve’s quarter-point interest rate cut behind us, all eyes will focus on the labor market. Although we will never get data for October, due to the government shutdown, the Bureau of Labor Statistics (BLS) will release the November jobs report on Tuesday, December 16th. Estimates are even tougher in this situation, because economists are trying to gauge the impact of federal workers, who accepted deferred resignation earlier in the year.
It is estimated that about 100,000 federal workers dropped off the official payroll numbers in October, with another 50,000 expected by the end of the year. (Note: government workers who were furloughed during the shutdown should have been counted as employed.) Chances are, if the October numbers were released, they would have shown job losses, primarily due to these government workers. But like magic, October never happened, so we move on to November!
It might be helpful to review the overall labor market performance over the past decade, and for the first nine months of 2025 to get a sense of how we got to this place. Here are the monthly average job creation numbers:
Pre-pandemic (2016-2019): 182,000/month
2020: -770,000 (pandemic!)
2021: 602,000 (post-pandemic surge)
2022: 380,000 (post-pandemic surge)
2023: 216,000
2024: 168,000
2025 (through September): 76,000
Based on alternative measures of the labor market, like the ADP private payroll report, Indeed job postings, and initial claims for unemployment benefits, the economy probably lost jobs in October (again, we will never know the exact numbers), and estimates for November are all over the place, from job losses to 40,000 jobs created. In other words, be prepared for anything! The unemployment rate is expected to remain at 4.4 percent in November, unchanged from September.
Regardless of the actual numbers for November, the labor market has slowed down in the second half of this year. Guy Berger, Workforce Economist in Residence at Guild, notes that the gradual cooling in employment is negatively impacting “folks who need a job rather than those who are already employed. That affects the young more than prime-working-age folks. It also adversely affects the pool of people who lose their jobs,” because it is awfully hard to find a new one.
There has been a keen focus on young college graduates (aged 22–27) who are struggling in the current labor market. The Federal Reserve Bank of Cleveland put out a report that highlighted the issue in stark terms: “The postpandemic labor market shows signs of diminished prospects for young college graduates. Relative to the broader population, young graduates are experiencing higher-than-average unemployment rates alongside widespread anecdotes of difficulties in finding employment and stories of tech industry contractions.”
This development is in stark contrast to the decades leading up to the pandemic, when “college graduates have typically faced lower unemployment rates, found jobs faster, and experienced more stable employment than high school graduates without college experience.” The data, along with employers, told us that a college degree was well worth the cost because grads were more likely to keep their jobs and earn more money over their lifetimes. “However, some of the long-standing job market advantages offered by having a college degree may be eroding.”
Before you say “A-I is the culprit!”, the authors see that this recent trend does not explain a decades-long trend. Additionally, “not all employment advantages have disappeared for young college graduates,” rather it is the early career labor market where the gap between high school and college graduates is narrowing. Over the course of a long career, college graduates still earn more and have greater job stability.