I see a lot of people blaming this on AI and raised interest rates.

The real reason for this stagnation is Section 174 of IRS code that was added by the 2017 tax cut bill. The section took effect in 2022 and was added to balance the budget.

This section basically doesn't allow to deduct cost of the software engineers and they are amortized over 5 years (10 years for international engineers). This puts some strains to regular businesses, but it kills start ups, as they are required to pay taxes even when they are still not profitable and might not even pay 5 years.

Lack of start ups means there is smaller number of openings which is lower mobility. Combined with amortization, it discourages hiring new people as again it requires 5 years.

I see this being dismissed and "it is definitively the interest rates and AI" AI is nowhere close to replace software engineers, in fact from the coworkers that enthusiastically embraced it I see lower quality of code. Interest rates actually came back to what they originally were before 2008.

The hiring issues started exactly when section 174 went into effect. I think the hiring craze in 2021 was only because companies realized that with slim margins in Congress a bill won't pass that will repeal it so they were hiring like crazy before it become a law. Indeed Democrats were trying to repeal it, it even pass the house, but it was blocked by Republicans in the Senate. Because God forbid they would help Americans and in turn let economy to look good under Biden.