Key Takeaways:
Remote work — not artificial intelligence — has become the primary driver of rising unemployment among young college graduates, according to new research from the Federal Reserve Bank of New York.
The expansion of remote work accounts for 64% of the increase in youth unemployment among college graduates under 29, whose jobless rate rose to 3.7% in 2022-2025 from 3.1% before the pandemic, New York Fed economists said.
"Employers may not want to hire fresh graduates onto distributed teams because it is more difficult to teach them the requisite skills from afar," the researchers wrote in a blog post published Monday.
The unemployment rate for young college graduates swelled to 5.6% in March 2026 from 3.6% in March 2019, while experienced graduates saw their rate dip to 1.8% from 1.9% over comparable periods. The researchers compared "remotable" jobs — software engineers and financial analysts — with "non-remotable" roles such as nurses and funeral home managers, using proprietary data from an unnamed Fortune 500 company.
The findings challenge the prevailing narrative that artificial intelligence is disrupting entry-level hiring, with the researchers noting that remote work's impact on youth unemployment has been greater than AI's so far. "Early-career experiences can have lasting consequences," they warned, citing research showing lower earnings and slower career progression for those entering weak labor markets.
Mentorship Deficit in Distributed Teams
Using internal data from a Fortune 500 technology firm, the researchers found that software engineers received about 20% more feedback on their work when sitting near colleagues than when working remotely — a pattern that held even before the pandemic. After offices closed, feedback levels fell sharply, hitting younger workers hardest.
"When people work next to their colleagues, they receive more feedback on their output and more mentorship," said Emma Harrington, an assistant professor of economics at the University of Virginia and one of the report's authors. "When they are separated by even a short distance, that feedback tapers off dramatically."
The firm shifted away from hiring new graduates as it embraced remote work, instead hiring workers about a decade older on average. When the company later implemented a return-to-office policy, it resumed hiring recent graduates, suggesting the mentorship challenges directly influenced its hiring decisions.
AI vs. Remote Work: The Real Culprit
While the impact of artificial intelligence on entry-level jobs has received significant attention, the New York Fed researchers found that AI exposure did not explain the divergence in unemployment rates between younger and older workers during the 2022-2024 period. Remote workflows were a much stronger driver, though the authors cautioned this could change as generative AI adoption accelerates.
Researchers at the London School of Economics reached a similar conclusion in a working paper examining new hires across the United States, the United Kingdom, Canada and Australia, finding that remote work had a clearer impact on early-career hiring than AI.
Very few Gen Z workers — 6% — prefer fully on-site work, according to a Gallup survey from May 2025, with 71% favoring a hybrid arrangement. Yet the New York Fed data suggests companies remain hesitant to hire inexperienced workers who will not be in the office, creating a tension between worker preferences and employer willingness to train.
The U.S. economy has been stuck in a "low-hire, low-fire" jobs environment that generally favors those who already have jobs over those searching for one, leaving many recent graduates struggling to gain a foothold early in their careers. The researchers warned that high unemployment rates among young college graduates are particularly concerning because weak starts in the labor market can produce persistently lower earnings and slower career advancement for years.
This article is for informational purposes only and does not constitute investment advice.
