Recent labor reports indicate that, indeed, it’s hard out there. The Black unemployment rate climbed above 7% in August, while the rate for recent graduates has surged above the overall rate for the first time in recent history. Apollo Global Management Chief Economist Torsten Slok, famous on Wall Street for being first to notice a wrinkle in the data, noted that it’s actually falling for recent graduates who are female and rising for recent graduates who are men. More generally, Slok also noted shortly ahead of the FOMC meeting that America has more unemployed people than job openings: 7.4 million to 7.2 million.

The last few months of 2025, called “the summer AI turned ugly” by Deutsche Bank, were full of anecdotal evidence that AI adoption is not going smoothly at the corporate level, on the one hand, and that it’s destroying entry-level hiring, on the other.

Powell himself has previously weighed in on the AI jobs debate, which saw predictions of a 50% wipeout of white-collar jobs and a fourth industrial revolution creating a bounty of new positions, by staking out a middle position. “There’s certainly a possibility that, at least in the beginning, AI will replace a lot of jobs, rather than just augmenting people’s labor,” Powell told the Senate Banking Committee in late June. “In the long run, AI may raise productivity and lead to greater employment. But it is a transformational technology, with effects that are unknowable.”

On Wednesday, Powell refused to be drawn on this specifically, saying “there’s great uncertainty” around the question of AI’s impact on the labor market. “I think, my view, which is also a bit of a guess, but widely shared, I think, is that you are seeing some effects, but it’s not the main, not the main thing driving it.” Still, regarding young people coming out of college, he said “there may be something there. It may be that companies or other institutions that have been hiring younger people right out of college are able to use AI that more than they had in the past. That may be part of the story.”

Powell sought to focus reporters’ minds, saying that the economy has simply slowed down and job creation has broadly slowed down with it. AI is “probably a factor,” he added. “Hard to say how big it is.”

Long-term consequences

The plight of Gen Z and minority jobseekers could reverberate well into the future, with ramifications not just for individual households but for the broader U.S. economy. Research shows that entering the job market during an economic slump can lower lifetime earnings, delay homeownership, and hamper wealth building, particularly for those already facing systemic barriers.

Academics have been studying the “scarring effects,” or labor market “hysteresis,” that result from economic downturns for decades. Harvard professor David Ellwood introduced the language of “permanent scars” in 1982, and Olivier Blanchard and Larry Summers advanced the research in a groundbreaking 1986 paper, arguing that unemployment, particularly following a recession, can have a major impact on someone’s career for many years to come. Adam Posen, President of the Peterson Institute for International Economics, told Bloomberg’s Odd Lots podcast in August that economics have looked hard for hysteresis since the Great Recession of 2008 but have not found it.

David Blanchflower of Dartmouth College and Alex Bryson of University College London have found something curious: youth wages and unemployment have not suffered dramatically since the 2010s, but they see an unmistakable rise in “despair” among young workers, stretching out over the past decade. Blanchflower told Fortune earlier this month that he thinks it can be summed up in an attitude of “this job sucks.” Now to that picture, you add something unmistakable: unemployment is going in the wrong direction.