Black and Hispanic College Graduates Face a Tougher Job Market: July 2026 Race, Jobs and the Economy Update

According to the Bureau of Labor Statistics’ (BLS) June jobs report, the national economy added 57,000 jobs, while the unemployment rate dropped slightly to 4.2%. The former was substantially below economists’ expectations of 115,000 jobs. Monthly job gains have trended downward since March, going from 214,000 to 57,000. 

The drop in the unemployment rate was not because more people found new employment but because over 200,000 unemployed people left the labor force last month and stopped looking for work.

The labor market remains lukewarm as job openings, layoffs and resignations remained largely unchanged in May according to BLS’ data. While the rate of unemployment remains low overall, the slow labor market is affecting one group in particular: new college graduates.

As college graduation season ends, many graduates are struggling to enter the workforce. Their topline unemployment rate, officially called the U-3 rate, rose to  5.3% in April, an increase from the January 2025 rate of  4.7%. The U-3 rate is the percentage of the labor force that is unemployed. 

The U-6 rate, commonly called the underemployment rate, includes unemployed workers plus involuntary part-time workers and discouraged workers. The U-6 rate for new college graduates has risen faster than their U-3 rate. Since January 2025, the U-6 rate increased from 8.2% to a high of 10% in April.

The chart below shows both the U-3 and U-6 rates by race:

The increase in the U-6 rate suggests that a portion of new college graduates are turning to part-time and gig work as suitable full-time work becomes harder to find. Fortune Magazine reported on new college graduates turning to gig and entrepreneurial work as entry-level job openings have declined while the number of applicants for the remaining jobs has increased. This has led some to pursue work outside of their formal areas of study. According to data from the Federal Reserve Bank of New York, 41.5% of recent college graduates work in a job that doesn’t require a college degree. 

Breaking down the data by race reveals a couple of interesting trends. First, both the U-3 and U-6 rates are higher for Black and Hispanic graduates compared to White graduates. The unemployment rate for Black graduates peaked at 12.3% in November of last year and then declined by over 5 percentage points (pp) to 6.9%, while the underemployment rate declined only 2 pp over the same period. Despite this decline, Black underemployment remains elevated compared to the beginning of 2025. Similarly, the U-6 rate for Hispanic college graduates has been steadily increasing since mid-2022.

A second important finding from the data is that not only are Black and Hispanic college graduates’ unemployment rates rising, but they are substantially higher relative to White graduates. The Black grads U-3 rate reached a low of 3.3% in March of 2024 and then experienced a spike to 6.9% in April, a 110% increase. For Hispanic grads, their U-3 rate increased by 80% from a low of 4.1% in January of 2025 to 7.3% in April. For White grads, their U-3 rate increased by only 36% from an October 2022 low of 3.18%.

While media attention has focused on unemployment among new college graduates, and rightfully so, it is more endemic for Black and Hispanic graduates. For college graduates overall, the reason for their employment woes has been broadly attributed to a combination of broader labor market weakness and AI changing the hiring decisions of companies. 

Firms facing higher costs, due in part to tariffs, are hiring fewer workers, including recent college graduates. Some of the layoffs result from poor management decisions in the past. For example, some companies over-hired in the post-pandemic boom and have now begun layoffs. These experienced unemployed workers are sometimes competing for jobs alongside new college graduates. These broader labor market trends are negatively impacting job hiring for all workers, including for recent college graduates.

While companies, particularly tech firms, have announced tens of thousands of layoffs this year, the biggest challenge for new entrants to the labor market is the drop in entry-level hiring. Firms are adopting a wait-and-see approach to AI by holding off on hiring junior workers until they better understand the capabilities of AI systems and who they can replace. Additionally, companies that are leaning into AI investments are letting workers go to free up capital for AI spending.

For recent Black and Hispanic college graduates, AI introduces another challenge – algorithmic discrimination. A study from Stanford University found that AI screening tools systematically discriminate against Black applicants. Research from the University of Washington has found that AI resume screening tools can show bias based on an applicant’s name. The tools they reviewed recommended applicants with White-associated names 85% of the time compared to only 9% for applicants with Black-associated names. 

When an AI underwriting algorithm is primarily trained on data from a pool of mostly White applicants, it can favor white candidates to the detriment of Black and Hispanic qualified applicants. A dataset of interactions between biased bank branch loan officers and applicants seeking a small business loan might produce an algorithm that reflects biases of the loan officers. Thus, AI can amplify existing systems of discrimination.

The labor market for recent college graduates is weak not only because of structural reasons like high costs and post-pandemic over-hiring but because of the AI shock. Declining entry-level job hiring is fueled by this dynamic. For non-White college graduates, potential discrimination from AI algorithms, in addition to the AI-related job hiring freezes, is directly affecting their ability to enter the workforce. The labor market is bad for recent college graduates. For Black and Hispanic grads, it’s even worse. 

Joseph Dean is the Racial Economic Research Specialist with NCRC’s Research team.

Photo credit: Safari Consoler via Pexels.