The rate of growth has fallen from 17% in 2021/22, and 9% in 2020/21, coinciding with the rate of inflation reaching 10.1% in October 2022.
While the median graduate salary has increased to £30,921 – up 1.4% from £30,500 last year – 40% of employers said they are finding it difficult to fill graduate jobs.
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Stephen Isherwood, chief executive of the ISE said it is important for students to continue to apply for jobs.
He told HR magazine: "Graduate recruitment growth has slowed down, but it's important to recognise that it has not been reduced. However, student engagement has dropped with applications severely down this year.
"It's important that graduates know that there are still jobs, but it's also vital that they don't wait around. If a recession does come, entry-level hiring is likely to be cut so those graduates that have applied early will have an advantage."
Fewer applications may be a contributing factor to the dwindling numbers of graduate hires.
There was an average of 62 applications per vacancy in 2021/2022, compared with 91 applications per vacancy in 2020/2021.
Dan Hawes, co-founder and marketing director of the Graduate Recruitment Bureau (GRB), said the findings could adversely affect the number of graduates applying for jobs.
Speaking to HR magazine, he said: "Graduate job seekers are going to see that headline figure and that's going to really knock their confidence. This summer it's going to be so hard to find a job, that's going to exacerbate the demographic factors and make graduates even less likely to apply to jobs because they don't feel that the jobs are out there.
"It could backfire on employers down the line because they're gonna find it doubly hard to find graduates.
"We are heading into recession, so a wait-and-see approach is understandable. Unlike previous recessions, there is still the supply shock affecting recruiters because there are limited numbers of graduates, and the requirements for their skills is at an all-time high."
Uncertainty in the labour market, in addition to the ongoing cost of living crisis, is leading to greater financial anxiety among younger workers.
Research from Aviva found Gen Z and millennial workers reported the highest levels of financial anxiety of all age groups with 69% and 73% respectively worried about managing their money.
Three fifths (60%) of workers aged 18-41 neglect to look at their finances at all.
Emma Douglas, Aviva’s director of workplace savings and retirement said this approach will cause more problems in the long run.
She told HR magazine: "The combined impact of limited financial education, a lack of budgeting experience and a general sense of being out of control can sometimes leave younger workers feeling more anxious about their finances.
"Gen Z and millennials are not alone in feeling the effects of the current climate. Understandable though it may be, the tendency to avoid financial decisions as a result of this anxiety does leave affected groups at a far greater risk of storing up unexpected money problems down the line."
