42% of recent college graduates are underemployed — the highest level since 2020, per Forbes

42% of recent college graduates are underemployed — the highest level since 2020, per Forbes

Underemployment Among College Graduates Reaches 5-Year High

Recent data indicates that 42% of college graduates are underemployed—the highest rate since 2020, according to industry reports. This trend reflects broader challenges in aligning higher education outcomes with labor market demands, raising concerns among policymakers and financial analysts.

The underemployment rate underscores a growing skills gap, with employers increasingly seeking candidates possessing technical and vocational training that many recent graduates lack as new research shows. Industries such as technology, manufacturing, and healthcare report persistent vacancies, despite a surge in degree holders entering the workforce according to Forbes analysis. A 2025 analysis by the Federal Reserve Bank of New York highlights structural mismatches, noting that recent graduates often accept roles below their educational qualifications due to limited job availability in their fields as the report details.

Economists attribute this crisis to shifting labor dynamics and evolving employer priorities. For instance, 62% of employers surveyed in 2025 cited skill shortages as a primary barrier to hiring college graduates. Meanwhile, financial pressures exacerbate the issue, as graduates—burdened by student debt—compete for entry-level positions in saturated sectors like education and social services according to Forbes.

The Federal Reserve's research further reveals that underemployment disproportionately affects graduates in humanities and social science disciplines, where job alignment remains below 40% as the study found. Conversely, STEM fields show slightly higher alignment rates, though they still fall short of pre-pandemic levels according to NSF data.

For investors, this trend signals long-term implications for labor productivity and economic growth. As colleges and employers recalibrate curricula and hiring practices, stakeholders may observe increased demand for reskilling programs and public-private partnerships as analysis suggests. However, with the job market for graduates at a five-year low as reported, near-term solutions remain elusive.

(Forbes, October 2025) (Forbes, October 2025) (New York Fed, 2025) (NSF, 2025) (Forbes, October 2025) (Forbes, September 2025)

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