For the first time ever, recent college graduates are more likely unemployed than the base US population. That’s the upshot of our most recent review of the New York Fed’s web feature on labor market statistics for college graduates and other cohorts back to 1990. Given this new development, it’s time to update the current state of the labor market for recent college grads and the overall workforce versus the prior two cycles.
Unemployment trends (rates calculated as a 12-month moving average):
- College graduates aged 22 to 65 with a bachelor’s degree or higher. The unemployment rate low for this group over the past two cycles was 1.73% in February 2001 and 2.08% in June 2007. It’s slightly higher at 2.23% as of June 2019, but at its lowest levels for the current cycle.
- Recent college graduates (aged 22 to 27) with a bachelor’s degree or higher. The unemployment rate here was as low as 2.58% in February 1998 and 3.33% in May 2007. It has been rising higher from its bottom of 3.62% in September 2018 for the current cycle to 3.85% as of June.
- Young workers aged 22 to 27 without a bachelor’s degree. The unemployment rate for this demographic reached a low of 6.29% in October 2000 and 7.59% in December 2006. It currently stands at 6.54%, marking the bottom for the current cycle and right in the middle of the prior two cycles.
- The unemployment rate of recent college graduates (3.85% as of June) is now higher than all workers (3.65%) for the first time from April through June in nearly 3 decades.
The important takeaway: the unemployment rate for recent college grads has been trending higher even though overall labor market conditions remain relatively strong. By contrast, the unemployment rate for young workers without a bachelor’s degree continues to fall to the lows of the early 2000s, pulling the rate for all workers down with it amid a relatively flat but low unemployment rate for working aged college graduates.
The steady drop of unemployment among young workers with no college degree is reflective of a robust economy as it pulls a greater number of less educated workers into the labor force. That also makes the rise in unemployment for recent grads concerning, especially since it never got back to prior cycle lows.
- Defined as: “the share of graduates working in jobs that typically do not require a college degree. A job is classified as a college job if 50% or more of the people working in that job indicate that at least a bachelor’s degree is necessary; otherwise, the job is classified as a non-college job.”
- The underemployment rate for college graduates aged 22 to 65 with a bachelor’s degree or higher was 34.0% as of June 2019, the bottom for the current cycle. The lows over the past two cycles was 31.6% in January 2001 and 33.7% in May 2009.
- The underemployment rate for recent college graduates aged 22 to 27 with a bachelor’s degree or higher was 41.0% as of June, marking a trough for the current cycle. The low over the past two cycles was 37.6% in May 2001 and 41.5% in February 2008.
Our take: both recent and overall college graduates have underemployment rates higher than in the early 2000s. Our next dataset shows why that is an issue…
- Median wage with a bachelor’s degree (aged 22 to 27): $44k (2018) vs. $45k (1990)
- Median wage with just a high school diploma (aged 22 to 27): $28k (2018) vs. $33k (1990)
Bottom line: that unemployment rates have been ticking higher for recent grads than the overall workforce is troublesome amid flat wages for the group, yet record levels of student debt. Underemployment is at least declining, but this cohort could get hit hard in the next recession.