My impression is that there's more demand for ML-oriented roles than for engineers in general, but it's still a poor job market compared to pre-2020. I hear from recruiters occasionally but mostly just dubious startups. The companies I interact with (mid-sized non-tech) are reluctant to hire anyone for any reason, even though management is full of ideas for new AI products.

I don't think I can offer advice on whether new grads should focus on it or not. In the short term it might be a really good move, especially if you're unusually talented, but if everyone is doing that and then the hype dies down a bit you might end up in a tough spot.

I told them to go more general skill or join/start a company but they’d rather just not broaden their horizon /shrug

Another friend who was experienced ML engineer is now a mobile engineer.