Author: Andrew Berger-Gross
Welcome to the July 2025 edition of NC Economy Watch: an update on what’s happening in the North Carolina economy and what it means for you, brought to you by the Labor & Economic Analysis Division (LEAD) of the NC Department of Commerce.
In this edition of NC Economy Watch, we examine the challenges faced by recent college graduates in North Carolina. While college remains a worthwhile investment for most students, recent college graduates are confronting a more difficult labor market than in previous years as they navigate technological change and the ups-and-downs of the post-COVID economy.
The Labor Market for Recent College Graduates
Mainstream news outlets have provided wall-to-wall coverage of the challenges confronting recent college graduates in today’s labor market. “Rising number of college grads are unemployed”, reports CBS News. “Young Graduates Are Facing an Employment Crisis”, proclaims the Wall Street Journal. “Are Entry-Level Jobs Going Away?”, asks Forbes magazine.
At the same time, the nation’s unemployment rate is well below 5% and Federal Reserve chair Jerome Powell recently described current labor market conditions as “solid”. Outside a handful of sectors like information technology and the federal government, we have seen very few mass layoffs, which is why the unemployment rate remains so low.
However, although most employers are reluctant to let go of the people they have, they are also hesitant to bring on new workers, with hiring rates reaching their lowest point in over a decade. The labor market might feel “solid” if you already have a job, but for jobseekers, especially those entering the labor market after graduating from college, this is a more difficult labor market than in previous years.
Data from NC TOWER show how a weakening labor market has impacted jobseekers who graduate with a bachelor’s degree from North Carolina’s state university system. Typically, the amount of wages earned by recent college graduates increases with each passing year as the economy expands [Figure 1]. However, the class of 2023 took a pay cut, earning a median of only around $32,000 the first year after graduating, down from a median of $34,000 for the class of 2022. Looking across twenty years of data, this is the second-largest decline on record, and the only time that the wages of recent college graduates have declined outside a recession. Of course, this is only a summary statistic, covering a diverse group of graduates who may have followed a variety of career paths after college, ranging from part-time to full-time employment to enrolling in post-baccalaureate coursework. Moreover, the class of 2023’s outcomes will likely improve over time as they age into their peak earning years. That said, the over-the-year decline in median earnings is consistent with other evidence demonstrating that labor market conditions have become more difficult for jobseekers, including for recent graduates.
Figure 1
College graduates majoring in Computer & Information Sciences & Support Services saw their post-graduation earnings plummet 22% as tech companies rushed to pare headcounts after the COVID-era tech hiring bubble went bust [Figure 2]. While wage cuts were largest among those with I.T.-related majors, earnings declined across a wide range of fields, including engineering, business, and social sciences. At the same time, graduates with health-related majors saw their wage earnings grow over the year. The healthcare sector has been a bright spot in this otherwise sluggish labor market as an aging population drives ever-growing demand for healthcare services.
While the challenges faced by recent college graduates are undeniable, their underlying cause is subject to debate. The actions that students, parents, educators, employers, and policymakers should take in response depend in part on whether these challenges are cyclical or structural in nature, or, in other words, whether these challenges are temporary or permanent.
Business sectors like information technology, as well as the broader economy, tend to go through periodic boom-and-bust cycles. In the past 40 years, the U.S. economy has endured four recessions: 1990-1991, 2001, 2007-2009, and 2020. Following each of these recessions, the economy has bounced back and grown even larger than before. The tech industry collapsed in the early 2000s but started growing again after the Great Recession and by the late 2010s reemerged as one of our fastest-growing and highest-paying sectors. If what we’re seeing now is simply a reflection of the normal business cycle, then it might only be a matter of time before the economy rebounds and I.T.-related graduates, and college graduates as a whole, find themselves back in demand.
Unfortunately, we also have reason to believe that these challenges might be permanent in nature. There is a growing body of evidence showing that employer demand for college-educated workers is slowing. On average, college-educated workers earn more money than those without a college degree, but the college wage premium (the additional amount of money workers earn when they have a college degree) has plateaued in recent years, suggesting that technological change may no longer favor college graduates the same way it did in previous decades.
It is important to emphasize that college remains a worthwhile investment for most students, and jobseekers need a bachelor’s degree to access many of our state’s highest-paying jobs. At the same time, as employer demands evolve to meet the needs of a changing economy, the degrees and majors that are most valued in the labor market might shift over time.
Another, more recent structural shift that could leave a permanent mark on the labor market is the potential for labor-saving technologies to reduce the demand for college-educated workers. Anecdotal evidence continues to accumulate suggesting that, at least among some I.T. and professional services firms, generative artificial intelligence and other technologies are being deployed to reduce the amount of labor needed to complete a given business task.
We have long known that college-educated workers and white-collar professionals are more likely to be exposed to artificial intelligence in their jobs than individuals with less educational attainment. But does that mean the challenges faced by recent college grads are due to the job-destroying impacts of A.I.? Or are they simply the result of unrelated trends that have nothing to do with A.I., such as the temporary ups-and-downs of the economy, or long-term changes in the value of a college degree? These are some of the questions we’ll be asking in the months ahead as we work to better understand North Carolina’s changing labor market.
For inquiries and requests, please contact:
Meihui Bodane, Assistant Secretary for Policy, Research and Strategy
NC Department of Commerce, Labor & Economic Analysis Division (LEAD)