Every time there’s fresh evidence of labor market softness, as with the July jobs report, an obvious question is raised about the health of the U.S. economy. Now, increasingly, economists and employees are asking a second question: Are we seeing the impact of artificial intelligence on knowledge workers?

There are plenty of signs that AI is making the job market tougher for young college graduates, but for the 22 million people with jobs that are categorized as professional and business services, wage growth has actually accelerated over the past year to levels solidly above pre-pandemic rates. This suggests that the state of the labor market for white-collar workers is best described as bifurcated — one where there are both winners and losers rather than one where most workers are worse off.

Despite the overall unemployment rate being a solid 4.2%, conditions for young workers are soft. Only 65.3% of 20- to 24-year-olds were employed in July, nearly 3 percentage points lower than the post-pandemic peak in January 2024 and roughly the same proportion as we saw in December 2008 following Lehman Brothers' collapse. For the millions of college graduates in the 22 to 29 age group, the unemployment rate stood at 3.7% in the first six months of the year, compared with 2.8% in 2019, according to Current Population Survey data.