The rot­ten luck of grad­u­at­ing into a re­ces­sion

Orlando Sentinel - - Success -

As col­leges con­clude their vir­tual grad­u­a­tion cer­e­monies, young work­ers are con­fronting the grim re­al­ity of an aw­ful la­bor mar­ket. We are liv­ing through the worst em­ploy­ment land­scape since the Great De­pres­sion, with mil­lions of Amer­i­cans sidelined, due to the global health and now, fi­nan­cial, pan­demic.

While many of the jobs lost will re­turn in the com­ing weeks and months as parts of the coun­try re­open and lock­downs re­cede, the em­ploy­ment out­look has changed sub­stan­tially. The Na­tional Bureau of Eco­nomic Re­search (NBER) ex­pects “that COVID-19 is a ma­jor re­al­lo­ca­tion shock,” which will mean a stag­ger­ing 42% of the re­cent lay­offs will be­come per­ma­nent ones. Based on spring­time em­ploy­ment re­ports, that trans­lates into 11.6 mil­lion jobs per­ma­nently lost.

This is a prob­lem for all work­ers, but es­pe­cially for new en­trants into the la­bor force. They now must com­pete with mil­lions of more ex­pe­ri­enced job seek­ers, vy­ing for a shrink­ing num­ber of avail­able po­si­tions. The Na­tional As­so­ci­a­tion of Col­leges and Em­ploy­ers, which was pre­dict­ing a ro­bust job mar­ket a few months ago, finds that more than one in five em­ploy­ers are con­sid­er­ing yank­ing of­fers that have al­ready been made to the class of 2020.

A some­what bright bit of news for new grads is that data still shows that those who earn the de­gree are likely in bet­ter shape than those who do not. Through April, the un­em­ploy­ment rate for those with at least a bach­e­lor’s de­gree was 8.4%, com­pared to 21.2% for peo­ple with­out a high school diploma. The bad news is that those who grad­u­ate into a re­ces­sion make less money in the early part of their ca­reers. NBER quan­ti­fied the dam­age in a 2006 pa­per, which found “grad­u­at­ing in a re­ces­sion leads to large ini­tial earn­ings losses.” These losses, which amount to about 9% of an­nual earn­ings in the ini­tial stage, even­tu­ally re­cede but slowly — halv­ing within five years but not disappeari­ng un­til about 10 years after grad­u­a­tion.

A more re­cent ac­count­ing by the New York Fed­eral Re­serve Bank ex­am­ined the fall­out from the Great Re­ces­sion for new grad­u­ates. “Those un­lucky col­lege grad­u­ates who started their ca­reers in the af­ter­math of the Great Re­ces­sion strug­gled to find jobs, let alone jobs that uti­lized their de­grees,” which prompted many re­cent grads to be­come un­der­em­ployed — that is, work­ing in jobs that typ­i­cally do not re­quire a col­lege de­gree. The un­der­em­ploy­ment rate for re­cent col­lege grad­u­ates, which “hov­ered at around one-third for at least the past 25 years,” soared to more than 46% after the Great Re­ces­sion, as many grad­u­ates took any job they could.

Con­trary to pop­u­lar per­cep­tion, most un­der­em­ployed re­cent col­lege grad­u­ates were not work­ing in low-skilled ser­vice jobs after the Great Re­ces­sion. Many found de­cent-pay­ing po­si­tions in in­for­ma­tion pro­cess­ing, sales, and in of­fice and ad­min­is­tra­tive sup­port jobs.

The best news for the class of 2020 from may be this: Ac­cord­ing to the New York Fed­eral Re­serve Bank, em­pir­i­cal anal­y­sis “sug­gests that un­der­em­ploy­ment is a tem­po­rary phase for many young grad­u­ates when they en­ter the la­bor mar­ket, as it of­ten takes time for newly minted grad­u­ates to find jobs suited to their ed­u­ca­tion.” As the virus re­cedes, re­cent grads should be able to slowly re­gain their foot­ing in the la­bor mar­ket.

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