Analyzing the unemployment data of American college graduates, JPMorgan's conclusion: It's not that AI is too powerful, it's that college degrees are not effective.

When "AI taking jobs" becomes a concern, JPMorgan Chase offered a colder conclusion: The rising unemployment of US college graduates may not be driven by AI, but instead reflects the weakening of the “educational advantage” itself. According to Wind Chasing Trading Desk, on February 27, Abiel Reinhart, an analyst in JPMorgan Chase's North America Economic Research Team, dissected the abnormal rise in US college graduate unemployment rates in his latest report: This round of increase looks more like an overall cooling in demand for college labor, rather than college graduates being overly concentrated in technology and other few industries or AI causing broad substitution effects. Over the past two years, changes in jobs within the US tech industry overlapped with the AI boom: JPMorgan pointed out that tech industry salaries and employment have continued to decline since peaking at the end of 2022, exactly spanning the Fed's rate hike cycle and the launch of ChatGPT, sparking debates such as "AI vs Rate Hikes / Over-hiring after pandemic." JPMorgan's core question is: Is the uptrend in US college graduate unemployment rate caused by "industry drag" (such as tech, finance) or an overall weakening in demand for educational skills? ------------------------------------------------------ Not Specific Industry Shock, But Overall Weak Demand To find the truth, JPMorgan divided the US job market into three categories: - Non-cyclical, college graduate-dense industries: healthcare, education, government; - Cyclical, college graduate-dense industries: professional services, finance, information (the report considers this group possibly more exposed to AI); - Other industries. ------------------------------------------------------ A common assumption in the market: College graduates like to cluster in specific industries such as tech and information, and the downturn in these industries leads to rising unemployment for higher-educated workers. However, JPMorgan's calculations overturn this assumption. Analyst Abiel Reinhart stated in the report: "We found that even if the industry distribution proportions of college graduates were exactly the same as those of people without college education, the unemployment rate for college-educated individuals would still increase by nearly the same magnitude." ------------------------------------------------------ This means the recent rise in unemployment among highly educated people is not because they've chosen the wrong industry, but because the market's demand for college skills is weakening overall. ------------------------------------------------------ Is AI Taking the Blame? If AI were causing a wave of white-collar unemployment, then the unemployment rate in high-risk industries like information technology and finance should keep surging. But in reality, that's not the case. JPMorgan used CPS microdata analysis and found that since the end of 2022, cyclical, highly educated industries (professional services, finance, information) saw the largest increase in unemployment rates. However, over the past one to two years, the 12-month moving average for these data has already flattened. Likewise, unemployment rates among non-college-educated workers in these industries also show a similar leveling trend. ------------------------------------------------------ By contrast, recently the unemployment rate among highly educated workers has continued to rise in "other industries" and in "non-cyclical highly educated industries (healthcare, education, government)" — industries with relatively low AI exposure. For example, recent large layoffs by the federal government have pushed up unemployment in the latter group. Based on this, JPMorgan judges: The leveling of unemployment rates in cyclical, college graduate-dense, and possibly higher AI-exposed industries makes it more difficult to claim that "AI is causing widespread impact on demand for college skills." ------------------------------------------------------ In other words, if AI is a broad shock, the group of industries most likely to bear the brunt should not plateau so early. ------------------------------------------------------ Looking Again at Job Growth: Not Just "White-Collar Industries" Are Weak JPMorgan also emphasized that unemployment rates are not equivalent to employment trends: Even if some industries see weak job growth, it may transmit unemployment pressure to other sectors by hindering cross-industry flows. Using employment numbers (non-farm) as a measure, "cyclical, college graduate-dense industries" have had the weakest cumulative performance since the end of 2022; but the report points out that industries with "lower proportion of college graduates" have seen almost equally weak cumulative employment growth, and if compared with pre-pandemic figures, the latter group performed even worse. This further shifts the narrative from "tech/AI specific shock" to a more macro explanation: Under cooling overall demand, college degrees are no longer significantly more resilient against cycles. This also again confirms JPMorgan's central logic: "These results refute the view that 'the disproportionate rise in college graduate unemployment rates is primarily due to specific industry effects.'" ------------------------------------------------------ What Might This Affect? For the market, the implication of JPMorgan’s analysis is: If the rise in college graduate unemployment is cross-industry, and the unemployment rates in industries with higher AI exposure have already leveled off, then the market needs to reassess two points: - Is the white-collar labor market “loosening across the board”? This could affect wage growth, stickiness of service sector inflation, and the Fed’s judgment framework for “soft landing/reinflation.” - Has the “education premium” temporarily declined? If the buffer provided by college degrees against unemployment thins, it will impact recruitment strategies, employee bargaining power, and the pace of talent flows between industries. ------------------------------------------------------ ~~~~~~~~~~~~~~~~~~~~~~~~ The above content is from [Wind Chasing Trading Desk](https://mp.weixin.qq.com/s/uua05g5qk-N2J7h91pyqxQ). 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