For many members of Generation Z entering the workforce, the job market presents a confusing contradiction: the economy is expanding, yet opportunities for entry-level positions seem increasingly elusive. According to a recent analysis by Goldman Sachs economists David Mericle and Pierfrancesco Mei, this troubling disconnect—termed “jobless growth”—may not be a temporary blip but rather a lasting feature of the new economic landscape.
Defining the Paradox: What Is “Jobless Growth”?
“Jobless growth” describes a situation in which an economy’s output (GDP) increases without a corresponding rise in employment. Though not entirely new, this phenomenon has emerged as a pressing concern in the post-pandemic era. The U.S. Bureau of Labor Statistics indicates that while GDP growth has remained steady, job creation has consistently lagged behind historical recovery benchmarks.
In their October 13, 2025 note, Mericle and Mei characterize the current labor environment as marked by “modest job growth alongside robust GDP growth,” suggesting that productivity gains—rather than increased hiring—are driving economic expansion. They emphasize that “the great majority of growth will come from solid productivity growth boosted by advances in artificial intelligence, with only a modest contribution from labor supply growth due to population aging and lower immigration.”
The “Low-Hire, Low-Fire” Labor Market
Federal Reserve Chair Jerome Powell has echoed these concerns, aptly describing the contemporary job market as “low-hire, low-fire”—a condition where both hiring and layoffs are subdued. Speaking in September, Powell highlighted that “kids coming out of college and younger people, minorities, are having a hard time finding jobs,” underscoring the disproportionate impact on new labor market entrants.
This hiring drought is especially pronounced outside of a few protected sectors like healthcare. As Goldman Sachs observes, payroll growth in most industries has turned negative or flat, despite otherwise favorable economic indicators. Companies are increasingly opting to streamline operations rather than expand workforces, with AI serving as a pivotal tool in this transformation. Federal Reserve Governor Chris Waller recently confirmed concerns when he stated, “job growth has probably been negative the last few months.”
AI’s Displacement of Entry-Level Roles
Far from being just a buzzword, artificial intelligence is reshaping employment fundamentals. The automation of routine tasks has rendered many entry-level positions obsolete, particularly in fields such as data entry, customer service, and basic programming. A Stanford University study reveals that AI has significantly curtailed entry-level programming jobs, with young workers in affected sectors experiencing a 13% employment decline.
This technological shift is reflected in corporate behavior. Goldman Sachs notes that the frequency with which executives reference both AI and employment in earnings calls has risen to “historic highs,” illustrating that business leaders are actively contemplating AI’s implications for staffing, often to the detriment of newcomers to the workforce.
Divergent Prospects Across Generations and Genders
The labor market challenges are particularly acute for Gen Z. Recent data from the Federal Reserve Economic Data (FRED) indicates that in August 2025, the unemployment rate for workers aged 16–24 stood at approximately 10.5%. More granular data reveals stark disparities along gender lines: in both Q1 and Q2 of 2025, 9.1% of Gen Z men ages 20 to 24 were jobless, compared to just 6.6% of women in the same cohort.
Even educational attainment, traditionally a buffer against unemployment, seems to be losing its protective value. As reported by Fortune, recent male college graduates from Gen Z have unemployment rates equivalent to their non-degree-holding peers, suggesting a diminishing return on higher education investments in certain fields.
Historical Echoes: Lessons from Past Recoveries
The current employment landscape resonates with previous episodes of “jobless recoveries.” Following the 2001 dotcom crash, for instance, GDP rebounded before employment levels recovered—creating a precarious environment for job seekers. Goldman Sachs economists caution that similar patterns may emerge as companies leverage AI-driven restructuring during economic downturns, delaying workforce restoration.
Policy Challenges and Economic Ramifications
As jobless growth becomes entrenched, policymakers face complex trade-offs. Central banks might consider maintaining lower interest rates to stimulate employment, but doing so risks stoking inflationary pressures. Governments, meanwhile, may need to reassess educational and training initiatives to better align with evolving market demands.
Markets, too, must adjust. While strong output and low interest rates might initially buoy asset prices, sustained weak job creation could gradually erode consumer spending power. Firms that fail to balance AI adoption with workforce development may find themselves dealing with talent retention issues and reputational fallout.
Conclusion: A New Normal for Entry-Level Workers
The hiring difficulties faced by Generation Z may reflect more than a temporary cyclical issue—they could herald a profound shift in how economic growth translates into employment opportunities. As Goldman Sachs economists posit, “jobless growth” may be the “new normal,” shaped by technological progress, demographic evolution, and shifting corporate strategies.
While this transition promises enhanced productivity and innovation, it presents substantial challenges for workforce development, economic policy, and social equity. For future workers, success will increasingly depend on adaptability, continuous learning, and strategic career planning in an environment where traditional employment pathways may no longer be reliable.
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