AI skill demand is hitting entry-level workers, St. Louis Fed finds

A tighter hiring market, combined with rising demand for AI-related skills, is cutting into job prospects for 18- to 24-year-olds, according to researchers at the Federal Reserve Bank of St. Louis. The finding matters for technology employers because the pressure appears concentrated at the career-entry layer, where companies traditionally build junior talent pipelines.

In a June 30 analysis, St. Louis Fed researchers William Rodgers III and Alice Kassens found that the employment rate for workers ages 18 to 24 dropped by more than two percentage points between April 2023 and December 2025. April 2023 was identified by the researchers as the recent high point for the U.S. labor market.

The decline showed up mainly as unemployment rather than workers leaving the labor force, Rodgers and Kassens said. That distinction matters: younger workers were still looking for work, but employers were offering fewer openings. Workers ages 25 to 64 did not see a similar deterioration, with employment outcomes for that group largely steady, according to the researchers.

AI demand is one factor, not the whole story

Rodgers and Kassens tied the youth labor-market weakness to a broader drop in job openings and to a more specific increase in demand for AI skills. They estimated that about one-third of the rise in unemployment among 18- to 24-year-olds was linked to greater employer demand for skills associated with AI roles.

The researchers framed AI’s effect as early and concentrated by age. Their argument is that AI requirements are raising expectations for workers trying to enter the labor market, especially in roles where employers can avoid posting, interviewing and hiring when demand softens.

The analysis does not show that companies are using AI to replace junior workers or to screen them out of applicant pools. Rodgers and Kassens said their postings analysis measured changes in the skills and tasks employers list in job ads, rather than direct adoption of AI for automation or hiring decisions.

For the study, the researchers used labor force participation data from the Current Population Survey, which is run jointly by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics. They used the BLS Job Openings and Labor Turnover Survey to assess overall labor demand. To measure demand for AI jobs, they reviewed detailed job postings and classified a role as AI-related when it required skills in areas including generative AI, machine learning and neural networks.

Junior hiring is weakening in exposed roles

The St. Louis Fed analysis fits with a labor market in which companies are keeping existing staff while hiring less aggressively. That pattern is particularly hard on new entrants, because fewer openings mean fewer chances to convert education or internships into full-time roles.

Other research points in the same direction. A 2025 Stanford University study found that since OpenAI released ChatGPT in late 2022 and generative AI spread broadly, employment for early-career workers has fallen significantly in highly AI-exposed fields, including software engineering and customer service.

Remote work may also be affecting the entry-level market. Researchers at the Federal Reserve Bank of New York found that unemployment among younger workers rose by one percentage point in jobs that can be done remotely, while unemployment among older workers in those roles declined slightly. In occupations that cannot be done remotely, younger workers performed better, according to that research.

The New York Fed researchers also cited hiring patterns at a Fortune 500 company suggesting that employers may be more willing to train junior workers when they are nearby, and more reluctant to hire inexperienced workers when distance makes training harder.

For tech operators, the practical signal is that AI is changing the shape of junior hiring before the evidence proves large-scale automation of entry-level work. Employers are asking for more AI-adjacent skills at the same time they are posting fewer jobs, which leaves younger candidates competing for a smaller set of roles with higher stated requirements.

This story draws on original reporting from CIO Dive.