Federal Reserve Chair Jerome Powell has issued a serious warning about the state of the labor market for Generation Z, calling it one of the most pressing issues facing the U.S. economy. In a recent statement, Powell said that employers across multiple sectors are struggling to attract and retain young workers, raising alarms about the long-term stability of the workforce and its impact on growth.
According to Powell, businesses are reporting that hiring recent graduates and young employees has become a “nightmare” for many industries. The central bank is hearing consistent feedback from employers that a large number of Gen Z workers are either unwilling to take available jobs or are leaving them quickly, creating a revolving-door labor market that slows productivity and strains companies’ ability to grow.
Powell pointed to data showing that college students and recent graduates are facing difficulties finding roles that match their skills, leading to frustration on both sides. Many young workers are seeking higher pay, better work-life balance, and flexible arrangements such as remote work — preferences that conflict with the expectations of many employers, particularly in industries that rely on in-person labor.
“The job market is strong, but it is not functioning as well as it should for younger workers,” Powell said. “We are watching this trend closely because if employers cannot hire and retain the next generation of talent, it will have consequences for economic expansion in the years to come.”
Analysts say this mismatch between Gen Z’s expectations and the demands of the labor market is part of a wider structural shift. Some companies have raised concerns that younger employees lack key professional skills or are less willing to accept traditional work schedules. Others argue that employers are failing to adapt to a changing workforce, relying on outdated hiring practices and offering pay that does not keep up with the cost of living.
Economists note that the situation is complicated by student debt pressures and rising housing costs, which make many entry-level salaries insufficient for financial independence. At the same time, automation and artificial intelligence are reshaping industries, leading to fears that opportunities for entry-level workers are shrinking.
Powell emphasized that resolving these challenges will require collaboration between the public and private sectors. “We need to look at how we are preparing young people for the workforce, and we need to make sure businesses are creating pathways for success,” he said.
The Federal Reserve will continue monitoring labor participation trends among young workers as it considers future interest rate decisions. A shrinking or unstable labor force could weigh on economic growth, making it a priority for policymakers.
