Every year, the month of May can mean only one thing: another crop of fresh-faced graduates — with high hopes for the future and a desire to shape a better world — entering the “real” world, or, in other words, making their way into the labor force.
Since they are graduating at a time when the economy is doing relatively well, they are highly likely to get a satisfactory job which makes decent use of their skills. At the very least, fresh graduates are better placed to get a job and earn more than those who are not equipped with a college degree.
Beyond just getting a first job, the health and condition of the labor market has a great impact on how a new graduate’s career turns out in the long-run. People who graduate at a time when the labor market is doing well tend to earn higher salaries throughout their careers when compared to those who graduate during an economic downturn.
And during times of recession, employees with a college degree on their résumé are more secure in their jobs; conversely, when the labor market is crumbling under an economic downturn, employees who cannot claim to be college educated are usually the first casualties in lay-off operations.
So what kind of labor market are the 2019 class of graduates being welcomed into?
The U.S. unemployment rate, in April 2019, stood at 3.6%, the lowest registered in nearly 50 years! While the labor force in general is in a pretty healthy condition, the job market for fresh graduates is quite different.
The primary reason behind this is that this particular demographic — 22-27-year-olds equipped with a bachelor’s degree and not attached with any educational institution — exhibits an affinity to pursue only certain kinds of jobs or industries straight out of college.
The percentages of fresh grads in advertising and promotion, actuary and journalism and law clerk posts are disproportionately high when compared to all other types. Positions as financial analysts and geological engineers are also quite popular in this demographic. Conversely, very few of them explore careers as housekeepers or drivers, in construction or manufacturing.
While the job market for fresh graduates is in decent shape, it is not exactly setting the history books on fire — unlike the nation-wide employment levels. Usually, the unemployment rate among recent graduates stands below the overall unemployment rate, but recent New York Fed numbers suggest that, in December 2018, both were almost the same, 3.7% for fresh grads and 3.8% for the whole labor force.
The current level of unemployment among recent graduates is higher than what it was during the period leading up to the 2008 recession, and during the boom years of 1997-2001.
And that is not the sole point of concern.
When contrasted with the period between 1998-2003, 2019’s college graduates exhibit a greater likelihood for being underemployed — involved in jobs where a college degree is unnecessary or the full range of their primary skills is not utilized.
Additionally, the median earnings (post-inflation adjustment) of recent graduates are no higher than their counterparts from 1990 and 2000. In other words, individuals who are fresh out of college in 2019 earn the same as they did in 1990, but maintaining a simple lifestyle got a lot more expensive since then.
To make matters worse, salary inequality has widened among recent graduates since the 20th century. So, the bottom twenty-five per cent of them earn less today than in the recent past. Repaying burgeoning college education loans is getting a whole lot harder.
Despite these troubling trends, fresh graduates retain a great deal of faith and confidence in the system. In fact, they’re increasingly exploring jobs in areas like the arts, social services, etc. — traditionally associated with comparatively less pay and low job security. Although sentiment among the workforce at large is downbeat, the latest government statistics suggest that today’s college-educated individuals are not being delusional.
By 2030, jobs requiring a college degree are expected to grow at twice the rate as those needing only a high school degree. Also, if the future of work entails a transition toward an automated workforce or robots as feared, then college degrees ensure greater job security — among people with a graduate degree, only around 10% are involved in “routine” tasks which are susceptible to robot or technology takeover.
Considering all of the above points, it is safe to conclude that 2019 is a good time for fresh graduates to join the labor force. Although unemployment and underemployment levels for this demographic are unusually high, and earnings have remained stagnant in most cases or reduced in some cases, the healthy condition of today’s job market ensures that they remain on a solid growth curve in the long-run, compared to those who graduated who a few years ago.
And, in the future, their college degree will serve as an excellent defense mechanism to counter any sudden economic downturns or a transition towards automation.