Going To School On The US Labor Market

By admin_45 in Blog

Last Friday’s Employment Situation Report, which showed a net gain of 304,000 job adds, was:

• The best report since last February’s 330,000 print
• 36% higher than last year’s average report of 223,000 jobs added
• The 7th best report over the last 60 months
• … And came during the US government shutdown, when any employer with Federal contracts likely pumped the hiring brakes.

In short, the report was strong enough to merit a deeper dive into broader US hiring trends so today we’ll look at one of our favorite slices of this data: employment by educational attainment. The goal here is to look at 1 and 12 month trends to see which cohorts are gaining/losing ground and what that means for the real state of the US labor market as we push off into 2019.

Three points on this topic:

#1: While 4-year college grads are a large piece of the American workforce, they are not the majority and recent employment trends show this group is close to full employment.

• Based on January 2019 data, there are 58.4 million Americans in the workforce over the age of 25 with at least a bachelor’s degree on their resume. With a total of 142.2 million workers in the US, this group represents 41% of the total.
• Over the last 12 months the total number of employed 4-year college-educated workers has risen by 2.4 million, but this cohort actually lost 364,000 positions last month versus December 2018. (All data in this note seasonally adjusted.)
• Last month’s unemployment rate for this cohort was 2.4%, up from December’s 2.1%. Both are close to what we would consider frictional levels. Participation rates are (and have been) stable at 73-74% over the last year.

The upshot: January 2019’s strong Jobs Report came even as 4-year college-educated workers actually lost 364,000 positions.

#2: The largest part of the US labor force is made up of workers who finished their education with high school, or completed a 2-year college degree, or attended (but did not complete) a 4-year program.

• The size of this cohort totals 73.6 million workers, or 26% more than those with a 4-year college degree. In total, this group represents 51.8% of the total US workforce.
• In aggregate, these workers have seen gains over both the last month (267,000 jobs added) and year (242,000 jobs added). The latter is well below the 4-year college group, which makes January 2019’s increase notable.
• Most of these gains have gone to the high school-only cohort over both the last month and year. That comes from rising participation rates (58.5% now, 57.5% a year ago) and lower unemployment (3.8% now, 4.4% a year ago).

The upshot: this is the group (and especially the high school-only cohort) to watch in terms of 2019 US labor market gains. Participation rates are 9 points (some college/AB) to 16 points (high school only) below 4-year college grads. Unemployment rates (3.4% to 3.8%) are low, but not on par with the BA/BS group (2.4%).

#3: Essentially two thirds (65.4%) of unemployed US workers are in the high school only/some college/2-year degree grouping, even though they are half (51.4%) of the workforce.

• This differential is partly caused by a skills gap (something the Fed’s Beige Book often cites as a key concern among employers), either actual or perceived.
• It might therefore explain why the percent of workers who are still jobless after 27 weeks of unemployment sits at 19.3% just now, more in line with prior recessions than deep into an economic recovery.

The upshot: we’ve written about the problem of employers requiring a 4-year college degree for positions that do not actually require the credential to do the job in question. Further US labor market gains will require firms to loosen those strictures, if only because the non-4-year college cohort is essentially fully employed.

Final thought: the market narrative on labor market conditions tends to look at headline numbers, but the data below the surface better illuminates the challenge of keeping the US labor market on an upward track in 2019. The sorts of jobs being created – those that the largest group of Americans by educational attainment can fill – will determine the pace of future job market gains.