The U.S. labor market may not be in great shape for college graduates when they receive their diplomas in the spring, according to a new National Association of Colleges and Employers report.

Employers are bracing for 2026 to deliver the toughest job market for college graduates in five years, with more than half (51 percent) of surveyed 183 employers rating the job market as poor or fair.

This represented the worst outlook for employment conditions since the onset of the pandemic.

They also project a tepid 1.6 percent increase in hiring for the Class of 2026. Only a quarter of employers plan to bolster their hiring efforts next year, while 14 percent expect to reduce the number of new hires. Sixty percent project to maintain the same level of hires in the year ahead.

Recruiting for full-time college hires generally begins in the fall or earlier. By spring, employers have a better grasp of their hiring outlook, though recent years have seen spring projections scaled back from initial autumn expectations.

Respondents—interviewed from Aug. 7 to Sept. 22—cited a decline in business needs, uncertain economic conditions, budget cuts, and inflation as the primary factors driving a decrease in hiring, researchers found.

Conversely, employers listed company growth, growing demand for their goods and services, and the importance of talent pipeline as reasons for expanding hiring plans. The anticipated increase in the number of retirements is another aspect that will boost personnel.

Industries in the professional services field, such as engineering, finance, and management consulting, were increasing their hiring. Chemical manufacturing, wholesale trade, and transportation were leading industries scaling back their hiring initiatives.

AI’s Impact on Gen Z

Despite growing signs of artificial intelligence (AI) having an impact on entry-level employment, 61 percent of employers noted that they are not replacing junior roles with the new technology.

Twenty-five percent of employers were uncertain whether they would be replacing entry-level roles with AI, while 14 percent said they were actively discussing the possibility.

This is in contrast to research indicating that the AI revolution is beginning to have an effect on young workers who have recently embarked on their new careers.

Using data from private payroll processor ADP, researchers at the Stanford University Digital Economy Lab determined that “early career workers (ages 22–25) in the most AI-exposed occupations have experienced a 16 percent relative decline in employment.”

The information, they wrote in a Nov. 13 paper, offers “early large-scale evidence consistent with generative AI disproportionately impacting entry-level workers in the American labor market.”

Some of this could be viewed in employment data.

Federal Reserve Bank of New York data show that unemployment rates for recent college graduates—ages 22–27—have been trending higher since May 2022, hovering at around 5 percent. Likewise, jobless rates among younger workers in the same age group have been steadily rising over the past two years, reaching 7.4 percent this past summer.

This has coincided with the explosive growth in generative AI.

But while experts say concerns about AI harming new college graduates are understandable, the data have been mixed, according to a new “Workforce Outlook” report from Handshake, a career platform for college students and recent alumni.

“So far, there is not a clear trend toward steeper hiring slowdowns for job roles that are thought to be more exposed to AI,” the report stated.

In fact, employers are searching for prospective employees with AI skills.

“The share of full-time job descriptions on Handshake that mention generative AI has increased almost five times since 2023, and the share of internship descriptions has increased more than four times,” the report said.

Past economists have typically associated new technology with new economic opportunities.

Austrian economist Joseph Schumpeter advanced the theory of “creative destruction,” which posits that innovative technology will destroy existing jobs and industries, but will also create new ones.

A new poll conducted by YouGov in partnership with online education platform Udemy found that 72 percent of U.S. adults expressed concern about the broader economic effects of artificial intelligence. Almost half (47 percent) reported being worried about their own jobs.

For now, it is too early to determine whether AI-driven anxieties are justified, economists at The Yale Budget Lab said.

“While generative AI looks likely to join the ranks of transformative, general purpose technologies, it is too soon to tell how disruptive the technology will be to jobs,” they wrote in an Oct. 1 paper. “The lack of widespread impacts at this early stage is not unlike the pace of change with previous periods of technological disruption.”