The 2026 Job Market: Supporting Students and Closing the Skills Gap

Ideas for Preparing More Career-Ready Graduates

We’ve written a couple of times this fall on the current job market for new college graduates. The bottom-line: the Class of 2026 is likely to have more trouble finding a job.

Students are concerned: about 61% of the Class of 2026 students find current news about the job market somewhat or very pessimistic – up from 50% for the Class of 2024. High competition for jobs and lack of available jobs top the list of reasons for that pessimism, with the political climate and AI much more important factors this year relative to last.

Source: Handshake.

How should universities respond? There are obvious short-term actions such as helping students sharpen their job search materials, expand their job search, polish interview skills, etc. Universities can double-down on connecting with employers to identify additional opportunities for these newest graduates.

Looking beyond the Spring of 2026, universities should also be asking questions about how they can help students be even more career-ready – addressing what has come to be known as the ‘skills gap’.

In the fall of 2024, just after we launched Finding Equilibrium, we wrote a series of posts on the role universities, employers, and students can each play in better preparing graduates for the work world. Finding Equilibrium was new then, and many of our current readers weren’t yet with us. So, we thought we would revisit some of the key points we made in those posts given their continued relevance.

Before we do that, we will review where the job market for new college graduates stands currently.

How Does the Job Market for New College Graduates Look?

It HAS continued to soften – with unemployment for 22–27-year-old recent college graduates trending up since just after the pandemic to 4.8% in June. A recent and nuanced look at the unemployment data finds that while the unemployment rate for 22-27-year-old high school graduates remains well above those with a college degree, the gap between the two groups has narrowed dramatically to a level not seen since the late 1970s.

Source: Federal Reserve Bank of Cleveland.

This study also reports that the ‘job-finding rate’, the fraction of the unemployed who find a job on a monthly basis, has declined over time for college graduates and now is similar to that of high school students. It is now taking longer for young unemployed college-educated Americans to find jobs – about as long as a high school graduate. However, it is important to note that once a young college-educated person has a job, they have greater job security and enjoy substantial wage premiums relative to those without a degree. The issue is landing the job…

Source: Federal Reserve Bank of Cleveland.

So is AI taking these entry-level jobs? While different studies come to different conclusions, in aggregate, it does not look like AI is to blame. There is strong evidence the general weakness in new graduate employment has been in the works for more than two decades – well before the launch of generative AI. And, this recent downturn in hiring is taking place during a period of policy uncertainty (tariffs), a sharp drop in consumer confidence, and after a huge surge in hiring in some of the affected fields.

What About the Spring of 2026?

Looking forward, the National Association of Colleges and Employers (NACE) conducts semi-annual surveys of employer hiring intentions. The story told in the most recent study is aligned with the above discussion of the general employment situation. The November 2025 data show that 45% of the employers surveyed describe the job market as ‘fair’ – the worst characterization of the job market for new college graduates we have seen since 20-21.

Source: NACE.

That said, despite describing the job market as ‘fair’, 85.6% of the employers surveyed by NACE said they would be either increasing or maintaining hires. And, exploring the impact of AI on hiring for the class of 2026, NACE reported 13.3% of the employers said their jobs required AI skills and 10.5% of entry-level jobs include AI in job descriptions.

So, is the Class of 2026 facing some kind of nightmare when it comes to employment? The Fall 2025 NACE numbers don’t paint that dire a picture. And, The Economist calls current worries about the job market overstated, noting the “unemployment rate has been bouncing around 50-year lows”. In their view, while there are reasons for concern (unemployment is creeping up, some major employers are shedding jobs, consumer confidence is low), they don’t find reasons for a “jobs-pocalypse”: mainly because the US economy continues to roll along.

That said, some are more pessimistic and a recent Wall Street Journal article called the current job market ‘fragile’, pointing out firms have plans to grow without hiring. Hopefully the NACE/Economist take plays out. But, we won’t be surprised if the Spring 2026 NACE survey reports a steeper decline in hiring. Whether or not the ‘crisis’ label fits, it does look like many more graduates in the Class of 2026 will certainly see it that way…

Employers Care More About Experience than Grades

What are employers looking for from our students? The NACE study had some important insights: the use of GPA to screen job applicants declined (dramatically) from 73% in 2019 to 37% in 2023 but has ticked back up to 42% in 2025-2026. So, GPA is less important than it was pre-pandemic.

NACE also reports a list of factors considered by respondents beyond GPA when screening applicants. The list for those who do not screen by GPA is shown below (it looks similar for those employers who do screen by GPA). Anything that smacks of work experience stands out.

Source: NACE.

Taking this further, NACE asked employers, what is most important when choosing between equally qualified candidates. The student’s major matters, but everything else at the top of the list is focused on some kind of experience: internships, general work experience, leadership experience, co-curricular experience – GPA comes in at number 7. These results support arguments we made in earlier posts about the importance of accumulated experience to employers.

Source: NACE.

NACE doesn’t get into why the decline in screening for GPA or why GPA is not more important in selecting among candidates. A degree is enough? Post-pandemic grade inflation? Other factors just more important? (Looks like a topic for a future post…). Whatever the reason, experience and experiences matter – a lot. Universities need to be looking for every opportunity to help students build their experience portfolio as they progress through their academic program.

AI and the First Job

AI is having a major impact on the hiring process. Candidates use AI to generate application materials making traditional cover letters (which now all sound alike) of little value in screening candidates. Firms are responding by using AI to screen applications for specific skills, giving tests and evaluations where the candidate can’t use AI, and focusing more on specific target schools and/or personal recommendations rather than standard application packets. Students need to know that AI may be making the job application process easier for them, but may well be making the likelihood of landing a job harder.

While AI may not yet be taking jobs, it is starting to impact what graduates do in that first job. Many of the tasks that a new hire performs are somewhat basic, requiring codified, explicit knowledge such as information gathering, basic data analysis, report writing, presentation development, etc. – the kind of stuff AI is already pretty good at. So, students will be expected to know how to use AI to perform those tasks.

Using AI to perform the basic tasks new hires once performed creates a different problem: those basic tasks are a form of training for the new hire, learning the industry, the customers, the firm, understanding how more experienced workers approach problems. All of this builds the tacit knowledge that firms really want! As reported in NACE, employers are looking for experience in who they hire. And, once hired, new employees need to be very deliberate in seeking out and developing such tacit knowledge in that first job.

Compounding this experience issue is the current move to eliminate middle management positions in organizations, increasing the number of direct reports any manager has. One study reported business had 1 manager for every 5 employees in 2017, increasing to one for every 15 employees in 2023. More direct reports mean managers have less time for coaching, mentoring, building personal relationships with direct reports and so on. One implication: a workplace where “only high-performing self-starters thrive”.

Universities need to recognize that the work world their graduates are stepping into is changing and doing as much as they can to help them prepare for those changes.

Addressing The Skills Gap

Looking beyond the Class of 2026, what can universities do to better prepare their graduates for the work world? We wrote extensively on this question in the fall of 2024. If you were with us then, the rest of this post is a summary of our ideas. If not (or you want a review), read on!

We took a careful look at the disconnect between what employers want and what new graduates bring to the work world. Surveys consistently show that new graduates are falling short of employer expectations on professional skills such as leadership, communications, adaptability, problem-solving, and so on. Likewise, students in many cases don’t bring the mindset or disposition employers want to their first job – such attributes as drive/work ethic, motivation and initiative, and resilience and persistence. (Disciplinary knowledge gaps aren’t as well documented, perhaps because they are not as carefully explored.)

Who is to blame for the skills gap? Universities? Employers? Students? We don’t see such finger pointing as helpful – stepping back, we believe four important factors are driving the skills gap: information (not enough of the right information available at the right time); incentives (needed to produce career-ready graduates aren’t there); structures (organizational structures don’t support needed accountability and responsibility); and generational differences (the characteristics of Gen Z affect career preparation).

We’ll look at each of these areas in turn.

Better Information

Employers don’t know enough about curricula and what universities are doing to help students build career skills. Faculty don’t know enough about what the work world expects from their students. Students don’t know enough about available careers, what it takes to be successful in those careers, and what choices they need to make to best prepare themselves for the work world.

We offered a four-point plan to address these information issues.

• Collect and publicly report placement data for all students in order that students, families, and universities are much more informed about career outcomes across academic programs.

• Capture co-curricular participation on transcripts - many of the professional skills in demand by employers are developed through engagement in co-curricular experiences. Capturing these experiences on transcripts signals to students they are important and to employers that a student has engaged in them.

• Partner with state agencies to provide data on career progression and earnings throughout the professional life of a graduate. Starting salaries are just that – a start. Students, families, and universities need to understand how college impacts student financial outcomes over the course of the graduate’s career.

• Develop forward-looking employment forecasts - more employer engagement is needed to help universities understand where the job market is going. Universities need to be preparing students for the jobs to come, not for the jobs that were.

Given rapidly advancing AI capabilities, addressing these information issues is more important than ever…

Incentives that Support Career Readiness

Are incentives in place to ensure faculty are teaching in a way that helps prepare students for their professional lives and to ensure curricula remain relevant and aligned with the work world? In general, we don’t believe either of these questions can be answered in the affirmative. We offered a set of ideas including 1) elevating the importance of teaching on campus; 2) preparing and supporting faculty to improve their teaching; 3) increasing rewards for innovation and impact in instruction, and 4) getting serious about curricula review and design.

What about students? How do we improve their incentive to do the work and focus on the courses and experiences that will help prepare them for a career – trading off less fun today for something that may benefit their career benefit years in the future? Most important here: relentlessly connecting the choices students make today with the benefits they will receive a few years hence.

Employers want students who have been educated to meet their specific job requirements – but training for a specific employer’s specific job is not what a university education is all about. So, universities should listen to employers – but not too much. Making it easier for employers to inform decisions about curricula, call out the skills gaps they see, and identify initiatives that will help students be more career ready is important.

Such engagement is powerful as long as the university keeps the student and their career path at the center of their decisions. Some ways to do this: work with industry or trade associations to better understand industry (as opposed to a specific employers) talent needs; bring employers into micro-internships and project-based courses; pair such employer engagements with an offer of skills-certifications for students; and studying all these student-employer engagements to draw campus-wide insights on changing workforce demands.

Supporting Gen Z

Some blame the skills gap on Gen Z – a generation they see lacking motivation, work ethic, resilience and grit, focus… Maybe some of this is true, but so are a host of positive traits: Gen Z has been characterized caring deeply about others, being highly collaborative, valuing flexibility and relevance… The point: universities must meet Gen Z where they are, not cast aspersions about who they are not.

Ideas here include advising focused on assessing each student’s work and leadership experiences and individualized counseling to steer students into curricular and co-curricular options that best complement strengths and address preparation gaps. Making sure faculty understand generational differences is important in modifying pedagogy to fit Gen Z learning styles. Universities should help employers understand this new generation – helping them see how Gen Z is different from (and similar to) previous generations.

In the final post in the skills gap series, we addressed a fundamental issue on university campuses: who specifically is responsible for the employability of a student? Every university offers a myriad of resources to support student preparation for the work world – career offices, advisors of all forms, mentoring programs, career fairs, professional development certificates, programs, workshops, and seminars, among many others.

Yet, it falls on the student to find their way through this maze of support to determine which of these many, many options make sense for them and how they can best use them. In essence, students are their own general contractors when it comes to building a career-ready education – and some students are far better equipped to play this role than others.

Getting better here involves actions such as mapping student contact points with available resources, simplifying and streamlining support resources where possible, sharing relevant information across student support offices, reorganizing resources and offices where needed – and importantly, looking for ways to integrate employability into the curricula.

Some Final Thoughts

A soft job market for graduates is nothing new for universities, but it certainly will be new for members of the Class of 2026. So, these students deserve our very best in helping them secure that first job. That said, every university should also be revisiting the way they think about and prepare their students for a successful career. It’s not only the right thing to do, in an environment where tuition revenue will become increasingly important, delivering career-ready graduates may well be the ticket to keeping the doors open…

What’s Next?

After a hiatus over the holiday (and giving you a break!), we’ll be back in mid-January. Some of the topics on our minds for Spring 2026 include the enrollment cliff, college athletics, low-income students, non-degree credentials, and fostering teaching excellence. That should keep us busy, but we have little doubt something else will pop up that we decide to pop off about! Maybe we will even get our podcast going in the Spring – the intentions are there…

We sure wish you, your families, and your friends the very best of the coming holidays. Thank you for reading Finding Equilibrium and we look forward to exchanging ideas with you in 2026!

Research assistance provided by Marley Heritier.

“Finding Equilibrium” is coauthored by Jay Akridge, Professor of Agricultural Economics, Trustee Chair in Teaching and Learning Excellence, and Provost Emeritus at Purdue University and David Hummels, Distinguished Professor of Economics and Dean Emeritus at the Daniels School of Business at Purdue.