Tech Hiring Slump: Are Software Engineers Facing a New Reality in the AI Era?

Recent data from the New York Federal Reserve Bank has sparked debate within the tech industry, revealing that software engineering graduates face higher unemployment rates—7.5% for computer engineering and 6.7% for computer science—compared to art history (3%) and social services (1.7%) majors. However, the underemployment rate for art history majors stands at 46.9%, indicating they often end up in low-paying or part-time jobs, while computer engineers have an underemployment rate of 17%. Despite the high unemployment rates, experts suggest that this trend may not be a simple cyclical dip but rather a symptom of a broader industry transformation. The St. Louis Federal Reserve also noted a decline in software job openings on Indeed, with rates lower than those seen during the coronavirus pandemic. This raises questions about whether the shift is temporary or indicative of a more fundamental change in the IT landscape. Industry leaders have differing viewpoints on this issue. Ivan Gekht, CEO of Gehtsoft, a custom-design software development firm, attributes the problem to an oversupply of IT graduates and a rapid expansion phase in tech companies that led to aggressive hiring and overstaffing. "For the past two decades, we've seen a surge in the popularity of the IT industry, especially in coding roles," he explains. "This boom fueled an explosion of online courses and boot camps, which churned out a large number of entry-level candidates. However, as companies grew, they often over-hired, and now we're seeing the consequences." Nic Adams, co-founder and CEO of 0rcus, points to the industry's shift towards developing autonomous systems. "Generalist or vanilla software roles are being phased out," he notes. "Credentials, checklists, and degrees are becoming less relevant as AI tools like large language models and code generators evolve rapidly. These tools aren't quite replacing entry-level coding roles yet, but they are getting closer and will continue to evolve." Neil Sahota, CEO and founder of ASCILabs and a United Nations AI Advisor, agrees that the current situation feels different. "Engineering roles have always fluctuated with the broader economy, with aggressive hiring during expansions followed by cutbacks during recessions," he says. "However, the speed and intensity of the current changes are unprecedented. AI is accelerating industry evolution, making 100 years' worth of change happen in just a decade." Sahota highlights the impact of generative AI tools like GitHub Copilot and ChatGPT. "Why write bubble sorts or perform code translations when Gen AI can do it more efficiently?" he asks. "However, tasks like integrating, verifying, and extending AI-generated code still require skilled human developers. These roles demand a deeper understanding of core computing principles and algorithms, where AI currently falls short." Brittany Lutes, research director at Info-Tech Research Group, adds context by pointing out that the data from the New York Federal Reserve Bank reflects trends over the past two years, a period marked by significant IT growth and rising salaries. "Companies were willing to hire individuals with practical skills, even if they were self-taught," she explains. "The pressure to secure a four-year degree in IT decreased as job offers and high paychecks became more accessible." Lutes also suggests that the decline in traditional IT roles might be offset by the emergence of new, higher-value positions. "There may be fewer stereotypical coding jobs, but new roles that require a blend of technical and business acumen are on the rise," she says. "These roles emphasize problem-solving and strategic thinking rather than just coding." To adapt to these changes, IT professionals need to focus on acquiring and demonstrating practical, adaptable skills. Lutes advises, "Stay away from certifications that are purely theoretical and invest in those that show your ability to apply skills. Demonstrate to hiring managers that you can learn and apply new technologies quickly to bridge any skill gaps in the organization." Networking and direct engagement with hiring managers are also crucial. "Submitting a job application alone isn't enough anymore," Lutes emphasizes. "Reach out to people currently in the roles you're interested in or connect with hiring managers directly. Building these relationships can make a significant difference in securing a job." Gekht underscores the importance of broadening one's perspective beyond coding. "Understand the business operations and value creation processes within your company," he advises. "Think like an engineer rather than just a developer. This shift in mindset can create real job security in a rapidly evolving market." In summary, the high unemployment rates for software engineering graduates are partly due to oversupply and an industry shift towards AI-driven automated systems. However, there is a growing need for professionals who can effectively integrate, verify, and enhance AI-generated code, as well as those who possess a deep understanding of core computing principles and business acumen. Staying adaptable, networking, and focusing on practical, applied skills will be key for IT professionals to thrive in this new landscape. Industry insiders believe that while AI is reshaping the IT sector, it is not entirely displacing the need for human expertise. Instead, it is redefining the roles and skills required. For companies like Gehtsoft and 0rcus, the challenge is to identify and nurture talent that can work collaboratively with AI tools to drive innovation. The IT industry remains vital, but the path to success for new entrants is increasingly about continuous learning and strategic thinking.