The Great Recession delayed economic progress for millions of younger Americans for everything from career advancement and starting families to household formation, so how has COVID-19 affected younger adults thus far? One way to measure its immediate impact is by looking at their current unemployment levels.
The New York Fed just updated its dataset on the current state of the labor market for younger workers compared to the overall workforce over the prior three cycles. Here’s how they’re faring in terms of those with and without a college degree (rates calculated as a 12-month moving average, data goes back to 1990):
#1: Recent college graduates (aged 22 to 27) with a bachelor’s degree or higher:
- Their unemployment rate has climbed to all-time highs of 10.5% and 13.3% in May and June 2020.
- The prior-cycle peaks were 7.9% in December 2010, 5.3% in February 2002 and 5.1% in November 1992.
- This rate was at 3.8% in February 2020 versus a record low of 2.1% in November 1997.
By comparison, college graduates aged 22 to 65 with a bachelor’s degree or higher:
- Their unemployment rate rose to record highs of 6.5% and 7.9% in May and June 2020.
- The prior-cycle tops were 5.1% in February 2010, 3.3% in October 2003, and 3.6% in November 1992.
- This rate was at 2.1% in February 2020 compared to a record low of 1.7% in December 2000.
Our takeaway: The disparity between the unemployment rate of recent college graduates and overall college graduates is now the widest it’s ever been at 4.0 points and 5.4 points as of May and June respectively. The runner up was just 2.8 points in January 2011. Therefore, college graduates newest to the labor force and trying to build their skills/careers have been hit harder than those with higher education and more experience in the workforce.
#2: Young workers aged 22 to 27 without a bachelor’s degree:
- Their unemployment rate jumped to record highs of 18.4% and 21.9% respectively in May and June 2020.
- The prior cycle highs were 16.4% in May 2010, 10.1% in September 2003, and 11.3% in June 1992.
- This rate was at 6.0% in February 2020 versus an all-time low of 5.9% in June 2019.
Our takeaway: The gap between the unemployment rates of recent college graduates and young workers without higher education is not as bad as it was during the Great Recession as of last month. The spread was 8.6 points as of June compared to 8.7-9.3 points during 2009/2010. That said, young worker unemployment went from being at near record lows to all-time highs within a couple of months.
Bottom line: the unemployment rate of recent college graduates (13.3%) is not only at a peak as compared to the last 30 years, but also exceeds the base population (12.6%) despite having a B.A/B.S. The COVID Crisis could potentially challenge conventional thinking that a college degree provides greater job security. How hiring and the recovery unfold over the next few months will therefore shed light on the real value of a 4-year college education.
Moreover, young workers also face unprecedented unemployment even coming off a near-record low base pre-COVID. Typically, higher educated people get hired first back into the labor force, while the stronger the economy grows the more likely it is to pull less educated individuals into the workforce. Ultimately, joblessness among recent college grads and young workers without degrees is just one more reason Congress needs to pass further stimulus as soon as possible to keep them attached to the labor force. These two groups are already worse off in terms of unemployment compared to the Great Recession, so the government will not want this setback to have the same lasting damaging effects.