New research from the Federal Reserve Bank of New York indicates that the rise of remote work, rather than the much-discussed influence of artificial intelligence, has significantly sidelined recent college graduates in the post-pandemic labor market. The study reveals a stark 20% increase in the unemployment rate among younger college graduates, those under the age of 29, since the pandemic, a period coinciding with a fourfold expansion of remote work arrangements.
This analysis, which combines federal employment data with an in-depth examination of flexible work policies at a major Fortune 500 technology company, challenges the prevailing narrative on college campuses that AI is the primary disruptor for young job seekers. Instead, researchers speculate that employers are increasingly hesitant to hire recent graduates into roles that can be performed remotely, citing difficulties in providing adequate training and mentorship in a distributed work environment.
Remote Work’s Impact on Early Career Unemployment
The New York Fed’s research compared unemployment rates from the pre-pandemic period of 2017 to 2019 with those observed from 2022 to 2024. During this post-pandemic timeframe, while unemployment among older college graduates saw a slight decline, the rate for their younger counterparts surged by 20%. The study’s authors suggest a direct correlation, stating, “Our analysis suggests that these trends are related, with remote work making it more difficult for managers to train and mentor new employees.”
Emma Harrington, an assistant professor of economics at the University of Virginia and a co-author of the report, highlighted the critical role of feedback in professional development. Her initial research focused on software engineers at the unnamed Fortune 500 tech firm, revealing a “pretty striking pattern.” Harrington noted, “What we saw was this pretty striking pattern that software engineers got about 20% more feedback if they were sitting near their colleagues than if they were distant from them,” a trend that held true even before the pandemic.
However, the shift to widespread remote work post-pandemic led to a significant drop in feedback. “And that really hit young workers much harder,” Harrington explained. “It was these people who had the most to learn that really saw this deficit in feedback.”
Hiring Shifts and Return-to-Office Policies
The researchers delved further into the hiring practices of the Fortune 500 tech company. As the firm increasingly adopted remote work models, a notable shift occurred in its recruitment strategy. “So they used to hire a bunch of new grads for their software engineering jobs,” Harrington stated. “Then they shifted really towards hiring much older people, like a decade older on average.”
This trend, however, was not permanent. The company later implemented what Harrington described as a “pretty aggressive” return-to-office policy. Following this pivot, the firm resumed hiring new graduates, suggesting a direct link between in-person presence and the willingness to invest in early-career talent. Harrington concluded, “[There was] some sense that these problems with mentorship were translating into whom this firm was deciding to hire.”
Broader Economic Trends
To ascertain if the patterns observed at the single tech company were indicative of the broader economy, the research team utilized a widely-used index to categorize occupations as either “remotable” (e.g., software engineering) or “non-remotable” (e.g., mechanical engineering). Their findings confirmed a significant divergence: the gap in unemployment between recent graduates and older workers was substantially wider in “remotable” jobs.
Specifically, the unemployment rate for younger graduates in “remotable” occupations experienced a jump of almost a full percentage point after the pandemic, while the unemployment rate among older graduates in these same roles marginally declined. The study ultimately concluded that remote work accounted for nearly two-thirds of the increase in unemployment among young graduates during this period. “This relative increase in young people’s unemployment coincided with the pandemic and has remained elevated since then, as have rates of remote work,” the researchers wrote.
AI’s Limited Role — For Now
In a direct comparison, the researchers also investigated the potential impact of AI chatbots on the unemployment rates of recent graduates. Employing another index that classifies occupations by their exposure to AI (e.g., engineering and accounting as more exposed, teaching and nursing as less), they found that AI exposure did not explain the observed divergence in unemployment rates during the 2022-2024 period. Remote workflows emerged as a far more dominant factor, according to Harrington, who nonetheless cautioned, “It’s always hard to make guesses about what’s going to happen with generative AI. It’s certainly possible that this story could really change over the next few years.”
This conclusion is echoed by researchers at the London School of Economics, whose working paper examining new hires in the U.S., U.K., Canada, and Australia similarly found remote work to have a clearer impact on early-career hiring than AI.
Regardless of the underlying cause, the New York Fed report issues a stern warning regarding the elevated unemployment rate among young college graduates. The researchers emphasize that “Early-career experiences can have lasting consequences,” noting that individuals who enter the job market during periods of slack labor demand often face lower earnings and slower career progression compared to their peers who begin their careers under more favorable market conditions. This underscores the potential for long-term economic scarring if current trends persist.
