AI hype could sideline Gen Z workers

As companies increasingly invest in artificial intelligence, young workers are finding themselves at a crossroads of opportunity and hardship. Economist Marc Sumerlin recently expressed concerns that firms may reduce hiring of Gen Z employees as they pivot towards AI technologies. Speaking to Australia's ABC News, Sumerlin highlighted a disturbing trend: businesses may choose to halt youth hiring despite AI's potential to enhance productivity in the long run. Sumerlin, a notable candidate to succeed Jerome Powell as the Federal Reserve chair, warned that while the promise of AI is enticing, its initial effects on the job market could adversely impact new entrants. "Before we get the good part of AI, we might get the bad part first, which is less hiring," he stated. Having served as deputy director of the National Economic Council under President George W. Bush, Sumerlin noted that through his recent discussions, many companies have reported significant improvements from their early AI integrations. However, this success may lead to more conservative hiring practices. He explained that it often takes one to two years for companies to see a return on investment when they hire new employees, which includes extensive training. This cautious approach comes at a time when unemployment rates for fresh graduates are on the rise, signaling a potential slowdown in entry-level job opportunities. According to the Federal Reserve, the unemployment rate among recent college graduates has climbed to an average of 4.59% in 2025, a stark increase from 3.25% in 2019. Sumerlin's remarks coincide with the Federal Reserve's struggle to gauge the economy's health amid a government shutdown that has stalled the release of vital data. He described the current situation as "driving in the fog," emphasizing that the central bank faces uncertainty in its decision-making processes. Despite these challenges, he suggested that easing inflation could warrant a reduction in interest rates to support the labor market. The implications of AI on entry-level positions have raised alarms among industry experts. Veteran London recruiter Quentin Nason described the graduate hiring landscape as a "meat grinder," burdening recruiters and overwhelming a generation of job seekers already laden with student debt. On the contrary, LinkedIn co-founder Reid Hoffman has lauded Gen Z as "AI native" and appealing to employers due to their technological fluency. In light of this evolving job market, Wharton professor Ethan Mollick advised young job seekers to prioritize mastering tasks that AI cannot easily replicate rather than merely accumulating skills. Nonetheless, both Anthropic CEO Dario Amodei and economist Gary Shilling caution that many entry-level jobs could vanish before new roles materialize, and that younger generations may need to adopt a more vigorous approach to thrive in the AI-driven economy. Goldman Sachs data from August revealed a troubling increase in unemployment among young tech workers, with the jobless rate for individuals aged 20 to 30 in the sector rising nearly three percentage points since early 2024—an increase more than four times higher than the overall jobless rate.