New York Fed study finds remote work, not AI, worsens unemployment for recent college grads

Remote work promised flexibility for employees, and even endless travel for digital nomads. But for young employees, remote work might be coming for their jobs instead—not AI. A recent study by the Federal Reserve found that remote work might be leaving young workers sidelined amid the rising unemployment rate that followed the 2020 pandemic.  Despite headlines warning that AI is coming for jobs, the study found that the factors contributing to unemployment for recent graduates predates the AI boom. While AI will play a role in defining employment patterns for younger generations moving forward, it is the modes of work that are having a larger impact today. The study compared the unemployment rate for individuals working in “remotable jobs” and “non-remotable jobs,” categories which were determined by analyzing if the tasks for a given job can be easily done remotely. The study found remotable jobs to be in sectors like software engineering, whereas nonremotable jobs included mechanical engineering.  The findings revealed that job prospects might be more challenging for young employees going into a remote job than for the non-remotable peers. For instance, the unemployment rate for young people increased by almost 1% between 2017-19 and 2022-24, while that of older employees decreased during the same period. “This relative increase in young people’s unemployment coincided with the pandemic and has remained elevated since then, as have rates of remote work,” the study said. For young individuals in nonremote jobs, however, the labor market might be a bit more favorable than its counterparts. While the relative unemployment rate also ticked in 2020, the rate declined back to its baseline after the pandemic. The study also estimates that around 64% of the  increase in unemployment among recent college graduates can be attributed to remote work, as employers become reluctant to hire employees who will need training remotely. “That remote work has weakened incentives to hire young workers by impeding on-the-job training,” the study added. “Employers may not want to hire fresh graduates onto distributed teams because it is more difficult to teach them the requisite skills from afar.”  But the implications of the study stretch farther than just landing a first job, as early career experiences help shape an individual’s trajectory. The study points out that young people who enter the workforce during lean periods—like a recession, or today’s entry-level remote job freeze—tend to have slower career progressions and earn less than their peers who started in better conditions.

College graduates are up against a number of forces as they navigate the current job market—AI being chief among them. As companies cut entry-level jobs and cite AI adoption to justify layoffs, new entrants to the workforce have found themselves in an especially precarious position. By the end of 2025, unemployment among young college graduates had soared to 5.6%.  But there might be another explanation for why the job market has proven so challenging for recent graduates, according to new research from the Federal Reserve Bank of New York.  It turns out the rise of remote work might be working against them, too: In an analysis of federal data on the labor force, researchers found that employers are not as likely to hire young college graduates if a job can be performed remotely.  From 2017 to 2019 and 2022 to 2024, the unemployment rate for young workers increased by nearly one percentage point across sectors where it is relatively easy to do a job remotely—software engineering, as an example. (For older workers in those jobs, unemployment actually declined slightly.)  It just so happens that this shift emerged alongside the pandemic, which also ushered in more remote work opportunities. In industries that are not as remote-friendly, the unemployment rate for young workers inched up during the pandemic but eventually fell again.   In fact, the researchers argue that remote work likely plays a much bigger role in the current employment picture than AI does, when it comes to young workers—and that unemployment among that group was already rising before the widespread adoption of AI. (Overall unemployment among young workers jumped by 20% between 2022 and 2025, reaching 3.7%.) They estimated that remote work was responsible for about 64% of the uptick in unemployment among recent college graduates.  A case study of a Fortune 500 company illustrates why this might be the case, according to the researchers.  Software engineers received less feedback when they were not in close proximity to their colleagues, which had a greater impact on young workers. That distance could also affect the quality of work, the researchers found: Employees who had previously worked together in person produced better work than those who had worked remotely for longer.  This phenomenon also seemed to influence how the company hired: During the pandemic, the company favored more experienced workers. When its offices reopened and people were required to return to the office, the company started hiring more young employees; on distributed teams, however, the company was still more likely to hire people with experience.  The lack of mentorship in remote arrangements is something companies have repeatedly cited over the years, as they have forced employees to return to the office. In surveys, even young employees have expressed a desire to work out of the office, in part for that reason.  Still, despite the push to return to the office, plenty of companies have retained hybrid or remote work arrangements—and they could risk leaving those workers behind if they don’t figure out how to support them in remote jobs.  While there may be some benefits to working out of an office for young college graduates, it is also difficult for them to get the experience they need and gain a foothold in the workforce if companies won’t take a chance on them in the first place.

An anonymous reader quotes a report from NPR: The buzz on college campuses is that AI is disrupting the job market for young college graduates. But new research from the Federal Reserve Bank of New York finds that the culprit may be something else: remote work. An analysis of federal employment data, paired with a deep dive into the flexible work arrangements at one unnamed Fortune 500 tech company, reveals that companies are less likely to hire recent college grads into occupations that can be done remotely. Researchers speculate that employers are reluctant to put such workers in a setting where it's harder to absorb lessons from coworkers. The researchers found the unemployment rate among younger college grads -- those under the age of 29 -- rose 20% after the pandemic, while unemployment among older college grads fell slightly. The study compares unemployment rates pre-pandemic, from 2017 to 2019, with unemployment rates after the pandemic, from 2022 to 2024. Unemployment rose as remote work grew fourfold, the researchers write. "Our analysis suggests that these trends are related, with remote work making it more difficult for managers to train and mentor new employees." Regardless of the cause, the New York Fed report warns that a high unemployment rate among young college grads is concerning. "Early-career experiences can have lasting consequences," the researchers write. "Research finds that individuals who began looking for jobs in slacker labor markets tend to have lower earnings and slower career progression relative to comparable peers who began their job search in better market conditions." Further reading: Why Is the US Job Market So Tough, Especially for Recent College Grads? Read more of this story at Slashdot.

Research from the New York Fed finds that younger college graduates have been sidelined by remote work in recent years, as companies may be reluctant to hire those needing more training and mentoring.