The real story behind recent entry-level hiring freezes, and what it means for your 2026 recruiting strategy 

There's a difference between a prediction and truth. But if you've been following the news, TikToks, and blogs from across the spectrum, you've been poisoned by an idea that's just that, an idea. Not truth. Not reality. Not what's actually happening in your hiring pipeline. 

The narrative? AI is eliminating entry-level jobs. The reality? It's the economy, not the algorithm. 

The Internal Hunger Games 

As companies pushed AI to their employees, speculation ran wild about what it would do to jobs, people, costs, and savings. Naturally, many frontline employees resisted playing the game. What came next? Help arrived with new technology offering seemingly infinite ways to push work to a chatbot, redefine jobs, and get the company more money with less effort. 

Translation: How quickly can you figure out how to replace your colleagues? It became an internal "Hunger Games" where the best storyteller wins. 

Causation vs. Correlation 

Here's what actually happened: The unemployment rate for 22-25 year olds started its downward trend in March 2022. 

There are several legitimate reasons companies pull back from entry-level hiring: 

• Uncertain market conditions 

• Entry-level hiring signals a bet on future growth or response to positive revenue trends 

• Adding to the bottom of the pyramid or reducing entry-level jobs is an early sign of success or trouble 

ChatGPT and DALL-E hit the mainstream in early 2023, sparking wild speculation by Goldman Sachs, Stanford, and Harvard that AI would "replace" 300 million jobs, about 9% of the global workforce. It sounded good to investors, scary to workers, and confusing for those of us wondering where we'd shake out. 

But here's the problem: The early AI predictions said it could do the work as good as any entry-level worker, or higher. That hasn't materialized equally across the board. There are hot spots, coding, some legal work, some research functions, but cutting and pasting AI into work isn't a race that inspires or transcends us. It coalesces human output into a recalculation of what has been. We should be inspired to produce better stuff, more creative stuff, game-changing outputs to grow. 

What Actually Caused the Shift? 

The Fed. Or more precisely, the Fed's response to high inflation. 

In March 2022, the Fed began a series of interest rate increases designed to counteract post-pandemic stimulus-inspired inflation (remember stimulus checks, PPP loans, supply-chain shortages, and increased demand for home goods and services?). 

To expand, businesses rely on capital, even when responding to positive revenue growth. They need upfront money to fund hiring, expansion, and costs that support new workers. That capital became more expensive, and businesses had to recalibrate quickly. 

According to research by Conor Hu, tech job posts fell 36% below pre-pandemic levels as of mid-2025. However, postings for roles with less than one year of experience experienced a larger 60% decline between 2019 and 2024. 

And here's the kicker: The population of recent grads has been increasing for several years, culminating in the largest high school graduation class in US history in May 2026. More people + fewer jobs = higher unemployment. Math. 

As Hu explains, in 2015 companies could adjust their balance sheets easily. But in 2022, the cost of capital exploded overnight. CFOs reacted differently than the brutal 2022 hike from near-zero levels when the pandemic forced immediate, drastic cost-cutting measures (firing juniors). This didn't happen in 2015. 

The Real Culprits 

Federal interest rates starting rising from near-zero in March 2022, reaching levels not seen since before the 2008 financial crisis. This made everything more expensive, including entry-level hiring. 

Even companies committed to AI integration have pulled back on junior hiring for economic reasons. Shopify went all-in on AI integration. Klarna did the same, then fired over 700 staff to rehire them back at lower salaries. When they announced their ambitious AI plans, the decision that AI was "delivering enough value to no longer hire juniors" would require substantial evidence that work is getting done without juniors. 

What This Means for Your Recruiting Strategy 

The youth unemployment spike isn't about AI replacing workers, it's about economic fundamentals that temporarily froze expansion hiring. As interest rates stabilize and economic conditions normalize, entry-level hiring will return. 

The question for HR leaders and business strategists: Are you prepared for when the market turns? 

Because when capital becomes more accessible again, companies that maintained their talent pipelines and recruiting infrastructure will move faster than those who dismantled them chasing an AI fairy tale. 

The real competitive advantage isn't replacing humans with AI, it's being ready to hire the right humans at the right time. 

Ready to build a recruiting strategy based on economic reality instead of hype? Let's talk about how Advance Recruitment can help you prepare for the next hiring cycle. 

Sources: Forbes, Federal Reserve Economic Data