US College Grad Jobless Rate Stays High at 5.6% as Oil Shock Looms

The unemployment rate for recent U.S. college graduates held at 5.6% in March, showing no improvement from the end of 2025 and remaining significantly above the 4.3% national average, according to data from the Federal Reserve Bank of New York.

"Young workers, however, are disproportionately employed in industries like retail and leisure—sectors that are reliant on consumer spending," Bank of America Institute economists Liz Everett Krisberg and David Tinsley wrote in a recent report.

The elevated rate for degree-holders comes even as the broader youth unemployment rate for all workers aged 22-27 improved slightly to 7.2% in March from 7.7% in December. While overall hiring picked up nationally in March, with 5.6 million new hires according to the Labor Department, job openings remained flat at 6.9 million and layoffs ticked up, suggesting a complex picture for new entrants.

The persistent slack in the graduate job market faces a new threat from surging energy costs, with national average gasoline prices hitting $4.48 per gallon. Should high prices force a pullback in consumer discretionary spending, it could stifle job creation in the very sectors that are the largest employers of young workers, potentially pushing the graduate unemployment rate higher in the coming months.

Deeper Headwinds

The struggle for new graduates is not a new phenomenon, with the unemployment rate hovering above 5% for nine straight months. The March figure of 5.6% is only a slight improvement from the four-year high of 5.8% reached in April and September of 2025.

Adding to the challenge is the issue of underemployment—graduates taking jobs that do not require a college degree. This rate, while improving, remained high at 41.5% in March. The trend reflects a potential skills mismatch in the economy and has been worsened by some companies citing the adoption of artificial intelligence as a reason for reducing entry-level hiring.

Despite the headwinds, there are some nascent positive signs. Job postings for younger workers on the recruitment platform Handshake were down only 2% from the prior year, a marked improvement from the dramatic declines seen in 2024 and 2025.

Consumer Spending at Risk

The broader labor market showed mixed signals in March. The Labor Department's Job Openings and Labor Turnover Survey (JOLTS) showed hires increasing by 655,000 to 5.6 million. However, job openings were little changed at 6.9 million, and layoffs increased to 1.87 million from 1.71 million in February.

The key risk to the outlook, particularly for entry-level jobs, remains the consumer. The recent oil shock stemming from the war in Iran has pushed gasoline prices up from under $3 to $4.48 per gallon nationally, according to AAA.

"So far, households have weathered the higher gas prices, largely thanks to the cushion provided by higher average tax refunds," the Bank of America economists noted. "But if gasoline prices remain elevated for a prolonged period, it could squeeze household finances and cause a pullback in spending. That could cool job prospects for younger workers."

This article is for informational purposes only and does not constitute investment advice.