AI adoption could send college grad unemployment soaring

The adoption of AI could lead to significant job challenges for entry-level workers as companies increase productivity. ServiceNow CEO Bill McDermott.

Unemployment among recent college graduates “could easily go into the mid-30s in the next few years,” McDermott told “Squawk on the Street” on Friday.

“Most of the work will be done by representatives. So it will be difficult for young people to differentiate themselves in the corporate environment,” he added.

Federal Reserve Bank of New York We estimate that the unemployment rate among recent university graduates will be around 5.7% by the end of 2025. The underemployment rate was 42.5%, the highest level since 2020.

Businesses across industries are cutting costs and reducing work with the help of new artificial intelligence tools.

Last month, To obstruct It has announced plans to cut nearly half of its workforce as artificial intelligence automates more jobs. Meanwhile, the software company AtlassianThe company, which has seen its shares fall 54 percent this year due to fears of AI disruption, said this week it would lay off about 10 percent of its workforce to support its AI investments.

Compared to previous technological revolutions, experts say AI is eliminating many white-collar jobs, including coding and marketing roles, allowing companies to reduce hiring and increase productivity with fewer workers.

Palantir CEO Alex Karp previously told CNBC that he wanted to increase revenue 10x while reducing headcount. Amazon CEO Andy Jassy said in June that the company would also shrink its corporate workforce with artificial intelligence tools.

McDermott told CNBC that ServiceNow tools will help businesses reduce hiring costs, adding that the software firm has already eliminated 90% of previously human-based use cases in customer service. It also allows businesses to maintain headcount while increasing their free cash flow and revenue.

“I think this will happen faster than people expect,” he said.