The Fed Can’t Help Millions of Young Tech Workers Struggling to Find Jobs

Washington
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Hundreds of thousands of young Americans fresh out of college with computer science degrees have struggled to find jobs over the past year. And their luck may not change anytime soon.

The Federal Reserve has started lowering interest rates last month to support the labor market and should lead to a further reduction in rates in the coming days. Companies in most industries, including technology, have held back hiring this year, hesitant to make these kinds of investments without knowing the full effects of President Donald Trump’s sweeping economic policies.

A series of rate cuts should ultimately boost hiring by making it easier for companies to increase their workforce. But lower rates cannot easily counter the economic uncertainty that continues to plague businesses or address the structural impact of AI on entry-level tech jobs.

“Layoffs and reductions in hiring plans due to the use of AI are expected to increase, particularly for workers with college degrees,” Fed Governor Christopher Waller said at an Oct. 15 event in Arlington, Virginia.

“For policymakers, we need to let the disruptions happen and be sure that the long-term benefits will outweigh the short-term costs,” he said.

Lower interest rates generally encourage companies to increase their workforce. But companies also need clarity on future costs when making hiring plans, a difficult task amid Trump’s current attempt to reshape global trade.

“The job market has been frozen because people are just having a hard time making decisions,” Laura Ullrich, an economist at Indeed, told CNN. “As long as economic uncertainty remains high, it’s difficult to know how many people you should hire.”

The situation has stabilized somewhat since the spring, when Trump unveiled his massive Liberation Day tariffs. Since then, the Trump administration has announced a handful of successful trade deals, but Trump’s trade war is far from over. On Thursday, the president canceled trade negotiations with Canada after the province of Ontario aired an anti-tariff ad.

Trump also attacked China due to his restrictions on rare earth exports and his administration is launching an investigation into whether China has complied with a 2019 trade deal. Trump is expected to have an in-depth discussion with his Chinese counterpart Xi Jinping at an upcoming meeting in South Korea.

In the meantime, businesses of all sizes and in most Industries are still unsure what the future might hold as U.S. trade policy continues to evolve, although the Fed is expected to impose additional rate cuts through 2026.

“Political uncertainty persists, but everyone realizes that substantial tariffs are now very likely here to stay. And now we have to deal with them,” Rich Lesser, global chairman of the Boston Consulting Group, said in an analysis of third-quarter earnings calls by BCG and Bloomberg Media Studios.

A survey of 130 CEOs released Oct. 16 by the Conference Board, showed that their expectations for the economy over the next six months “changed from neutral to pessimistic” and that 68% said they planned to maintain or reduce the size of their workforce.

The entry-level tech jobs crisis and the Fed

AI is beginning to automate some tasks typically performed by an entry-level tech worker, which could lead to a structural change in the tech industry job market. And tech companies are increasingly adopting this technology; a September Google study found that 90% of tech workers use AI at work.

The Fed’s key interest rate, which influences borrowing costs more broadly, operates based on demand, not supply. This means that it succeeds in stimulating demand to strengthen the labor market, which the central bank is currently trying to do, but it does nothing to solve the problems on the supply side.

“There is indeed a slight lag,” said David Seif, chief economist for developed markets at Nomura. “You have a lot of new (computer science) graduates from college, but there doesn’t seem to be enough demand for these entry-level workers. »

Tech and math industry job postings on Indeed were down 35% in early October compared to February 2020, with some titles, like developers and designers, experiencing the greatest declines. Meanwhile, positions focused on AI and data centers have seen a massive increase in job postings over the same period.

“The higher unemployment rate among recent college graduates is primarily driven by a structural shift in tech hiring amid strong labor supply growth,” wrote Matthew Martin, senior economist at Oxford Economics. an analyst rating released earlier this year.

“Computer science and mathematics professions are disproportionately exposed to automation and displacement,” he added.

The Conference Board’s latest CEO survey showed that most business leaders surveyed expect AI to “fundamentally transform more than 50% of jobs in their organizations over the next 5 years.”

Young Americans who studied computer science in hopes of landing a well-paying job are now grappling with the economic challenges of a disruptive new technology.

“I feel like I’m competing with AI just to try to get my foot in the door,” Abraham Rubio, a computer science and game programming graduate from Bloomfield College at Montclair State University in New Jersey, said earlier this year. told CNN previously.