Recent college graduates are working jobs that never asked for their diploma at a rate of 41.5 percent. That is the Federal Reserve Bank of New York's latest quarterly reading on underemployment among graduates ages 22 to 27, and it counts as an improvement: the quarter before, the same series read 42.5 percent, the highest mark since 2020. Progress, in this economy, means the wound closed from a gash to a deep cut.
Inside Higher Ed laid out the comparison worth sitting with, drawn from that same New York Fed data: recent graduates were unemployed at 5.6 percent in March, against 4.2 percent for all workers. Run that gap back to March 2021 and it nearly closes, 6.5 percent for grads against 6.1 percent overall. The pandemic-era numbers were worse across the board, but they were shared. What changed is not that graduates are struggling more than they used to. It is that they are now struggling more than everyone else, which never used to be the pattern.
Jaison Abel, who runs microeconomic research at the New York Fed, told Inside Higher Ed: "It's not the worst it's ever been. The aftermath of the Great Recession was a more challenging period of time, but I also don't want to minimize it: it's a tough time for new graduates." He also gave the outlet the baseline that makes 41.5 percent legible: underemployment among college graduates runs "about one-third... during the best of economic times and the worst." A third is the floor. Two in five is the current reality.
The mechanism matters, because it is not the one people assume. This is not a wave of layoffs eating new hires; layoffs remain comparatively rare. What collapsed is hiring itself, the willingness to open a junior seat at all, and when a seat does open, a new graduate is competing against workers laid off elsewhere who already have two or three years of experience and need no training. Federal Reserve Chair Jerome Powell named the adjacent problem at an April press conference, without softening it: quits are low, hires are low, "there's effectively no new net job creation," so the market is technically "in balance," but "an unusual and uncomfortable kind of a balance where people who don't have jobs will have a hard time breaking in unless somebody quits their job," Powell said. Nobody is quitting. Bureau of Labor Statistics data puts the quits rate at or below 2 percent for most of the past year, a level otherwise seen only briefly during the 2020 pandemic shutdown, before the reopening-era hiring boom pulled it back up. The door does not open from either direction.
Layer a second, older story on top and the picture stops looking like a bad year and starts looking like a bad design. As Quartz laid out in June, of the more than 800 occupations the Bureau of Labor Statistics tracks for its employment projections, only 178 typically require a bachelor's degree to enter. American colleges award more than 2 million bachelor's degrees a year regardless, 2.1 million in the 2020-21 academic year alone, a 20 percent jump over the prior decade. Most openings in those 178 occupations are not new positions; they are replacements for people retiring or moving on. Ron Hetrick, an economist at the labor-data firm Lightcast and a former Bureau of Labor Statistics economist, borrows a term from the complexity scientist Peter Turchin for this, Quartz reported: elite overproduction, a society minting more credentialed people than it has credentialed positions to give them. The Niskanen Center, a Washington policy think tank, offers the image for it, cited in the same piece, and it is exact: musical chairs, except nobody ever takes a chair away, they just keep adding players.
This is where "study something practical" runs out of road. Inside Higher Ed's own breakdown by major shows computer engineering graduates with unemployment near 8 percent, worse than criminal justice at 3.6 percent. Credential inflation compounds it further: a Harvard Business School study, done with Accenture and the nonprofit Grads of Life and cited in the Quartz piece, found employers demanding degrees for roles that never used to need one, tightening a door that was already too narrow. Abel is right that a degree still "pays off over the full career, not just those first couple of years." Economists Elise Gould and Joe Fast, writing for the Economic Policy Institute, are right too to call it premature to blame this entirely on AI, since young workers without degrees are seeing unemployment rise as well. AI is a real, separate pressure on the layoffs side of the ledger: Challenger, Gray & Christmas, the outplacement firm that tracks corporate layoff announcements, found it was the single most cited reason for job cuts in April, more than one in four of them. But all of that describes an average. It does not describe the graduate standing in front of 178 chairs, whether they majored in something that pays close to $40,000 or one that pays $80,000, watching someone with three years of runway already sitting down first.
Who benefits from selling a credential built for a job market that stopped existing at this scale. Who carries the risk of finding that out only after the tuition is paid. Who, in an economy where quitting itself has become a luxury, actually gets to leave. The market cleared the credential once. It is worth asking who decided it should keep clearing more of them than there was ever room for.
