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Key Takeaways
- The labor market is telling two very different stories. Younger workers without college degrees are experiencing some of the strongest employment conditions of the past two decades, while college graduates in the same age group are facing a much tougher hiring environment.
- AI may be affecting some entry level professional roles, but it is only part of the picture. Retirements, slower immigration and shortages in skilled trades are also supporting demand for many non-degree jobs.
- A college degree still offers meaningful employment advantages over time, and headline unemployment figures do not capture the full story.
The unemployment rate is one of the most closely watched indicators of the economy, but one national number can hide very different experiences underneath the surface.
Among workers ages 22 to 34, those without a college degree are seeing unemployment near the low end of their two-decade range. College graduates in the same age group are facing almost the opposite, with unemployment near levels seen only during the pandemic and the years following the 2008 financial crisis.
For years, those groups generally moved together. More recently, their paths have separated, raising questions about what is driving the shift and whether artificial intelligence is beginning to reshape entry-level professional work.
One Labor Market, Two Very Different Experiences
For roughly two decades, younger workers with college degrees and those without degrees experienced similar changes in employment. That relationship has recently changed.
Workers ages 22 to 34 without a college degree now sit near the low end of their historical unemployment range, while college graduates of the same age are near the high end. Conditions for young graduates have only looked this difficult during the pandemic and the slow recovery following the 2007–2009 recession.
That does not mean a college education has lost its value. Among workers ages 25 to 54, college graduates averaged 2.7% unemployment over the twelve months through July, compared with 3.6% for workers with some college and 4.7% for those with only a high school diploma.
Why the Divide Is Growing
Part of the explanation comes down to supply and demand.
Many skilled trades are dealing with an aging workforce, while fewer younger workers are entering some of those fields. Slower immigration has also reduced another source of available labor. With fewer qualified electricians, welders and machinists available, employers may need to compete more aggressively for workers.
College graduates are facing a different environment. More Americans hold bachelor’s degrees than ever before, creating a larger pool of candidates for professional positions.
AI may be adding another challenge. Tasks such as drafting, summarizing and basic analytical work have traditionally been part of entry-level roles, but they are also areas where AI tools have advanced quickly. Companies may not eliminate those positions, but they could need fewer people or expect new hires to contribute at a higher level sooner.
In-Person Work Is Holding Up Better
The divide also shows up across different occupations.
Construction and mining, maintenance and repair, and food service are seeing relatively stronger employment conditions, while science, computer and mathematics roles are experiencing higher unemployment relative to their own history.
That fits with what technology can and cannot easily replace. Software has become increasingly capable of assisting with desk-based work, while many jobs in construction, repair and service still require workers to be physically present.
Recent hiring data point in the same direction. Food services and drinking places added 59,000 jobs in August, accounting for more than one-third of the 162,000 jobs added across the economy that month.
The Unemployment Rate Does Not Tell the Whole Story
Even with strong demand for many non-degree jobs, the unemployment rate can make conditions look stronger than they really are.
The rate only includes people who are working or actively searching for a job. Among younger workers, nearly one-quarter of those with only a high school diploma are outside the labor force, compared with roughly one in seven college-degree holders.
The broader labor market is also experiencing what the report describes as a “low-hire, low-fire” environment. Employers are holding on to current workers but adding fewer new ones, which can make entering the workforce more difficult even when unemployment remains low.
Why the Divide Matters for Investors
Changes in the labor market can affect more than employment.
If job and wage growth are concentrated in skilled trades, construction and in-person services, spending may flow toward different households, regions and industries. Strong demand for skilled labor may also support construction and infrastructure activity, influencing businesses tied to industrial materials and equipment.
Worker shortages could also keep wage pressure elevated in some industries. Because many skilled-trade jobs require specialized experience and in-person work, they are harder to automate. If those shortages continue, higher labor costs could keep some service prices elevated.
One Economy, Two Job Markets
The labor market is no longer moving as uniformly as it once did. Skilled trades and many in-person occupations are benefiting from worker shortages, while younger college graduates are navigating a more competitive professional hiring environment.
For investors, the divide is another reminder that a single headline number rarely tells the entire story. Understanding where jobs, wages and spending are growing can provide a clearer picture of what is happening across the economy.
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The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Advisor Services Holdings C, Inc., dlb/a Kestra Holdings, and its subsidiaries, including, but not limited to, Kestra Advisory Services, LLC, Kestra Investment Services, LLC, Kestra Private Wealth Services, and Bluespring Wealth Partners, LLC. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by any entity for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.
Kestra Advisor Services Holdings C, Inc., dlb/a Kestra Holdings, and its subsidiaries, including, but not limited to, Kestra Advisory Services, LLC, Kestra Investment Services, LLC, Kestra Private Wealth Services, and 8/uespring Wealth Partners, LLC, do not offer tax or legal advice.
