It's a hot job market, unless you're Gen Z

• Gen Z is having a difficult time becoming established in today's economy.
• The pandemic-induced recession left lasting scars for Gen Z.

The job market may be reigniting, but that doesn't mean Gen Z graduates are having an easy time joining the workforce.

According to the Federal Reserve Bank of New York, 41.3% of recent college graduates, those aged 22 to 27, were employed in a job that did not require a college degree in December, which is up from 40.6% in 2020.

"This rise in underemployment among recent college graduates has been driven by an increase in the share of younger workers in low-wage jobs, meaning that as these new college graduates struggle to find their place in the professional world or re-evaluate their career goals, they are accepting lower-paying work in the meantime," Luke Pardue, economist at payroll and benefits provider Gusto, told Insider.

More and more college graduates are having a difficult time establishing themselves in today's economy. As they enter the workforce, they're straying away from their degrees and working in roles that don't require higher education. This means they're being offered lower wages, which could impact their financial health in the long term.

"Whatever the cause, these trends will have profound long-term economic consequences, both for these workers and the U.S. economy as a whole," Pardue said.

The pandemic could have a lasting impact on Gen Z

The economic fallout from the Coronavirus pandemic has impacted all Americans, especially young adults. This demographic has experienced remarkable setbacks during one of the most critical stages in their life — a time when they are expected to make their mark on the world.

In the professional services sector, employment growth for workers 20-24 years-old rose by 0.4% month-over-month/year-over-year in December 2021, per Gusto platform data. This is about a quarter of the 1.4% growth rate seen in December 2020. In November 2019, before the COVID-19 virus began to spread, the monthly growth rate was about 1.5%. Gusto's data highlights the rate continued to decline as the virus spread, suggesting the pandemic may be primarily at fault for the demographic's poor job prospects.

"The pandemic-induced recession left lasting scars on the graduates of the class of 2020, who struggled to find high-quality jobs in the middle of a pandemic," Pardue said. "Furthermore, the shift to a virtual environment has significantly hampered young graduates' abilities to make professional connections and find career opportunities that are a good match for their interests and skill sets."

Underemployment could impact Gen Z's financial future

As the underemployment rate grows for Gen Z, it will likely take the group a longer time to amass wealth.

A study from the Brookings Institution, claims that low-wage employment "leads to a cycle of attrition and replacement that pushes the labor market toward a less-than-optimal equilibrium." Simply, if employers do not invest in their workers, it hinders the ability of employees to progress in their careers. This is because low-wage workers typically work in fields that don't focus on skills that align with higher paying jobs in the professional sector.

"These underemployed workers will likely see slower earnings growth over the entire course of their careers, and the inability to match highly-skilled college graduates to the jobs that require those skills will significantly hamper the long-term growth of the U.S. economy as well," Pardue said.

As the pandemic creeps into its third year, Gen-Zers will continue to face struggles navigating the professional world. As they seek out employment, where they choose to work and for how much, will determine their financial futures.

Are you a Gen Z graduate who is having a hard time finding a job in your degree? Reach out to this reporter at alloyd@insider.com to share your story.