The Fed can’t help America’s young tech workers who are struggling to find a job

By Bryan Mena, CNN

Washington (CNN) — Hundreds of thousands of young Americans fresh out of college with a computer science degree have struggled to find a job over the past year. And their luck may not change anytime soon.

The Federal Reserve began to lower interest rates last month to support the labor market and is expected to deliver another rate cut in the coming days. Companies across most industries, including technology, have pumped the brakes on hiring this year, hesitant to make those kinds of investments without knowing the full effects of President Donald Trump’s sweeping economic policies.

A string of rate cuts should eventually bolster hiring by making it more feasible for companies to expand headcounts. But lower rates cannot easily counteract the economic uncertainty that continues to bedevil businesses or address AI’s structural impact on entry-level tech jobs.

“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 said during an October 15 event in Arlington, Virginia.

“For policymakers, we must let the disruption occur and trust that the long-run benefits will exceed any short-run costs,” he said.

Rate cuts do nothing about the bigger issue for hiring

Lower interest rates typically incentivize companies to staff up. But businesses also need clarity on future costs when developing hiring plans, a challenging task amid Trump’s ongoing bid to reshape global trade.

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

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

Trump has also lashed out at China over its restrictions on rare earth exports and his administration is launching a probe looking into whether China complied with a trade agreement from 2019. Trump is expected to have a wide-ranging discussion with his Chinese counterpart Xi Jinping during an upcoming meeting in South Korea.

In the meantime, businesses of all sizes and across most industries are still unsure of what the future might hold as US trade policy continues to evolve, even with the Fed expected to deliver additional 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, Boston Consulting Group’s global chair, said in an analysis of third-quarter earnings calls by BCG and Bloomberg Media Studios.

A survey of 130 CEOs released on October 16 by the Conference Board, showed that their expectations for the economy in the next six months “turned from neutral to pessimistic,” and that 68% said they plan to maintain or shrink the size of their workforce.

The entry-level tech job crisis and the Fed

AI is beginning to automate some tasks usually done by an entry-level technology worker, possibly resulting in a structural shift in the technology industry’s labor market. And tech companies are increasingly adopting the technology; a Google study from September found that 90% of tech workers are using AI at work.

The Fed’s key interest rate, which influences borrowing costs more broadly, functions through demand, not supply. That means it’s good at boosting demand to shore up the labor market, which is currently what the central bank is trying to do, but it does nothing about supply-side issues.

“You do have a bit of a mismatch,” said David Seif, chief economist for developed markets at Nomura. “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.”

Job postings in the technology and mathematics industry on Indeed were down 35% in early October compared to February 2020, with certain titles, such as developers and designers, seeing the steepest declines. Meanwhile, AI and data center-focused roles have seen a massive increase in job postings during the same period.

“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, senior economist at Oxford Economics, wrote in an analyst note published earlier this year.

“Computer and mathematical science occupations are disproportionately exposed to automation and displacement,” he added.

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

Young Americans who studied computer science for the promise of a good-paying job are now grappling with the harsh economics that come with a new, disruptive technology.

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

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