NY Fed Finds Remote Work, Not AI, Killed Entry-Level Jobs

Artificial intelligence may not be the cause of the sharp rise in youth unemployment, according to a Federal Reserve of New York blog post.

Instead, remote work accounts for 64% of the increase, New York Fed research economist Natalia Emanuel, University of Virginia assistant professor Emma Harrington and Harvard University professor Amanda Pallais wrote in the post.

The timing of the surge in unemployment among young college graduates coincided with the rise of remote work since the pandemic, suggesting that companies may be reluctant to hire less-experienced workers in distributed work arrangements because remote work makes it more difficult to train and mentor new employees, according to the post.

Unemployment among college graduates under 29 averaged 3.1% from 2017 through 2019 but rose to 3.7% from 2022 through 2025. That increase happened at a time when the unemployment rate for more experienced college graduates declined from 1.9% to 1.8%, the post said.

In addition, the unemployment rate among younger people in occupations in which tasks can easily be performed remotely increased by 1 percentage between 2017-2019 and 2022-2025, while that among younger people in “non-remotable occupations” remained steady, per the post.

“Since so many young college graduates are in remotable occupations, our back-of-the-envelope calculation indicates that remote work can explain 64 percent of the increase in unemployment for all young college graduates between 2017-2019 and 2022-2024,” the authors wrote.

The authors noted that many analysts have attributed young college graduates’ challenges in the labor market to the spread of generative AI. They added that the rise in unemployment for this group preceded the general availability of that technology.

“Of course, generative AI and other factors may play a more primary role in determining the employment patterns of younger workers going forward,” they wrote in the post. “Nontheless, the evidence to date suggests that the rise of remote work has meaningfully contributed to the recent challenges facing young college graduates.”

ServiceNow CEO Bill McDermott, whose company offers an AI platform for employers, told CNBC in March that college graduates could struggle to find work due to AI. McDermott said that because so much work will be done by agents, unemployment for new college graduates could reach the mid-30s within a couple of years.

Stanford University economists Erik Brynjolfsson, Bharat Chandar and Ruyu Chen published research in August that found that in fields where generative AI tools can automate work done by humans, it’s harder for young workers to land jobs.