Layoffs and unemployment rates grow among university graduates

When Starbucks announced last month that it had fired more than 1,000 corporate employees, it highlighted a disturbing trend for white-collar workers. Over the past few years, they have seen a surge in unemployment rates and slower wage growth than other groups.

It also fueled that long-standing discussion of economists. Is recent unemployment just a temporary development? Or will they inform something more ominous and irreversible?

After sitting below 4% for more than two years, the overall unemployment rate since May has surpassed that threshold.

Economists say the job market remains strong by historical standards, and much of the recent weakening appears to be linked to the economic impact of the pandemic. Companies actively hired amid a surge in demand and moved to layoffs after the Federal Reserve began to raise interest rates. Many of these companies are trying to make their businesses more lean under investor pressure.

But amid the rapid advances in artificial intelligence and President Trump's federal targets, it disproportionately supports white-collar jobs, which some thinks it has begun a permanent decline in knowledge work.

“We've seen a lot of effort and we've seen it,” said Karltannenbaum, chief economist at Northern Trust. “I tell people that there are waves.”

So far, few industries have represented the changes in the last few years, than the creation of video games that began in 2020, as couch-bound Americans have sought a new form of home entertainment. The industry reversed the course and actively hired it before embarking on a period of layoffs. Thousands of video game workers lost their jobs last year and the previous year.

The scale of the unemployment was like the host of the industry's annual awards show, the Game Developers Choice Awards, complained about a “recorded layoff” during the opening monologue in 2024. That same year there was a trend of unionization that spread to better-paid workers, such as game producers, game producers, designers and corporate engineers, who won Game Fallcraft.

At Bethesda Game Studios, owned by Microsoft and creating fallout, workers said they had unionized some because they felt the union would leverage in the soft labor market, as they were wary of rounds of company layoffs in 2023 and 2024.

“It was the first time Bethesda had experienced a layoff in such a long time,” said Taylor Welling, a studio producer who earned a master's degree in interactive entertainment. “It scared so many people,” Microsoft declined to comment.

Unemployment rates in financial and related industries still remained low, but increased by about a quarter from 2022 to 2024. The rise in interest rates slowed demand for mortgages and businesses, and businesses tried to lean. In a revenue call last summer, Wells Fargo CEO noted that the company's “efficiency initiative” had pruned its workforce over 16 quarters, including a cut in nearly 50% of workers in the company's housing lending sector since 2023.

Last fall, Wells Fargo fired about a quarter of the approximately 45 employees of the Behavioral Management Intake Team, which confirms accusations of corporate misconduct against customers and employees. Heather Rolfs, a let go lawyer, said she believes the company is trying to save money by reducing the US workforce, and that she and her colleagues are attractive targets as they have recently tried to unionize.

“I think it's great to get rid of two birds with one stone,” Rolfs said. Some of her former colleagues say they are worriedly waiting every Tuesday after payday. Another worker on the team, Eden Davis said:

A spokesman for Wells Fargo said in a statement that the layoffs have nothing to do with the union, saying “we will regularly review and adjust staffing levels to suit the market situation.” He said two managers on the team also lost their jobs.

Atif Rafiq, author of a book on corporate strategy in senior positions at McDonald and Amazon, said many companies are trying to emulate Amazon's model of building teams that go beyond capabilities to reduce barriers between workers with different expertise, such as coding and marketing. In the process, they may discover redundancy and take on layoffs.

In a memo announcing the layoffs at Starbucks last month, CEO Brian Nicole cited the goal of “remove layers and duplicates and creating smaller, more agile teams.” Nissan provided similar evidence for the management cuts announced this month.

Overall, the latest data from the Federal Reserve Bank of New York shows that unemployment rates for university graduates have risen 30% since bottoming out in September 2022 (2% to 2.6%) compared to about 18% (3.4% to 4%) of all workers. An analysis by Julia Pollack, Chief Economist at Zippleck Crutter, shows that unemployment rates are the most rising among people with bachelor's or university degrees, but not with a degree.

ADP researching the labor market showed that employment rates slower for jobs that require a university degree than other jobs.

Some economists say these trends are inherently short-term and may have little concern for themselves. Lawrence Katz, a labor economist at Harvard University, noted that the increase in unemployment rates among college-educated workers was slightly greater than the overall increase in unemployment rates, and unemployment rates for both groups remained low due to historic measures.

Professor Katz argued that slowing wage growth for middle-class workers could simply reflect the discounts that these workers effectively accepted in exchange for being able to work from home. Data from the Institute for Liberal Economic Policy show that wages for workers in the 70th and 80th percentiles of income distribution are increasing slowly than wages in other groups since 2019.

However, there are other indications that returns on university degrees may have changed over time. The wage gap between those with and without college degrees grew steadily in 1980, but has flattened over the past 15 years, but it remains high.

Flattening may partly reflect the fact that as university attendance increases, there are more college-educated workers that employers can choose. However, some economists argue that it reflects a decrease in the need for employer college graduates. For example, information technology is becoming more sophisticated, so there are fewer jobs like bookkeeping. Such jobs do not necessarily require a university degree, but they were often appealing to graduates.

Artificial intelligence can also reduce the need for it by increasing the automation of white-collar jobs. A recent academic paper found that software developers using AI coding assistants improved their key measures of productivity by over 25%, and productivity gains appear to be the biggest among the most experienced developers. The results suggested that employing AI could reduce the wage premium enjoyed by more experienced coders as it erodes productivity benefits over beginners.

MIT economist Mert Demirer, who co-authored the paper, said in an interview that the work of software developers could change over the long term, making human coders a type of project manager overseeing multiple AI assistants. In that case, wages could rise as humans become more productive. Additionally, if cheaper software leads to even greater demand, AI will expand employment among coders.

Still, at least in the short term, many tech executives and their investors seem to see AI as a way to trim staffing. Software engineers at large tech companies said they refused to be named for fear of harming their job prospects. His team was about half of last year, and he and his colleagues said they were expected to do roughly the same amount of work by relying on AI assistants. Overall, unemployment rates for technology and related industries rose more than half from 2022 to 2024, jumping from 2.9% to 4.4%.

Then there was Trump's attempt to remake the federal government. This has so far resulted in job losses and employment freezes for federal employees and employees of universities and other nonprofits that rely on government funds. Johns Hopkins University, which relies heavily on funding for federal research, announced this month that it has abandoned 2,000 workers around the world as a result of Trump's cuts.

Professor Katz of Harvard University noted that the majority of university-educated workers relied on the federal government over other groups, either directly or through nonprofit funding. “What appears to be a major contraction in science and research, education and government spending could potentially have a very large impact,” he said.

“The overall unemployment rate among university graduates does not seem to be particularly rising,” he added. “But that could be in the next six months.”