AI-driven optimism may be putting Gen Z job seekers at a disadvantage, as companies delay hiring in anticipation of future productivity gains from artificial intelligence, warned economist Marc Sumerlin. Speaking to Australia’s ABC News, Sumerlin, a leading contender to succeed Jerome Powell as Federal Reserve chair, expressed concern that firms betting on AI could soon halt recruitment of young workers, fearing they won’t see returns on new hires until AI delivers measurable benefits. “I’m very worried that companies now are going to say: ‘I know I’m not getting the returns on AI right now, but I can see it coming — and so I’m going to stop hiring young people now,’” Sumerlin said. He cautioned that while AI has the potential to boost efficiency and economic output in the long term, its short-term effects on employment could be detrimental—particularly for those entering the workforce. Sumerlin, who served as deputy director of the National Economic Council under President George W. Bush, noted that many companies are already seeing early improvements from AI integration. But these gains may lead to reduced hiring, as businesses become more cautious about investing in new employees who take time to ramp up. “When they hire a new worker, it often takes a year or two before they get value from that worker,” he explained. “There’s a lot of training, and so companies invest in young people, and then after a couple years, they start to get returns.” This hesitation is already showing signs in labor market data. The Federal Reserve reported that the unemployment rate for recent college graduates stood at 4.59% in 2025—up from 3.25% in 2019—indicating a tightening of opportunities for new entrants. With the government shutdown disrupting the release of key economic data, Sumerlin said the Fed is operating “in the fog,” making it harder to assess the true state of the job market. Despite this uncertainty, he argued that inflation is cooling and the Fed should lower interest rates to support employment. The situation reflects a broader anxiety about how AI is reshaping the early career landscape. In London, veteran recruiter Quentin Nason described the current graduate hiring process as a “meat grinder,” where AI tools overwhelm recruitment teams and leave young job seekers struggling to stand out. Many are burdened with student debt and face increasingly competitive, automated hiring systems. Yet not all perspectives are negative. LinkedIn co-founder Reid Hoffman has described Gen Z as “AI native” and “enormously attractive” to employers due to their natural comfort with emerging technologies. Wharton professor Ethan Mollick advises young professionals to focus less on accumulating skills and more on mastering tasks that AI cannot easily replicate—such as creativity, emotional intelligence, and complex problem-solving. Still, some experts remain skeptical. Anthropic CEO Dario Amodei and economist Gary Shilling warn that many entry-level jobs may vanish before new ones are created, leaving younger workers to compete in a more fragmented and demanding job market. Goldman Sachs data from August showed a nearly 3-percentage-point rise in unemployment among tech workers aged 20 to 30 since early 2024—more than four times the increase in the overall jobless rate. As AI reshapes the economy, the path for Gen Z remains uncertain—caught between the promise of innovation and the reality of a labor market in transition.