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Home Publications Blogs Beat the Press The Recession for College Grads

The Recession for College Grads

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Friday, 17 August 2012 10:27

The WAPO has a nicely graphed blog post telling us that there was no recession for college grads. It shows that employment for college grads has risen at a strong pace since the start of the recovery and is well above its pre- recession level. The problem is that we need a denominator in this story. (This seems to be a recurring problem at the WAPO, like when they tell us about the multi-trillion dollar shortfall projected for Social Security without pointing out that it is equal to around 0.6 percent of future GDP.) Anyhow fans of fractions can see that there was in fact a serious recession for college grads which still lingers today. As the graph shows, the unemployment rate for college grads rose from less than 2.0 percent before the downturn to a peak of more than 5.0 percent in 2009. Currently it is hovering near 4.0 percent, more than twice its pre-recession level.

Unemployment Rate for People With at Least a College Degree

col-grad unSource: Bureau of Labor Statistics.

So how do we get a doubling of unemployment at a time when college grads are scooping up millions of new jobs? Yes folks, this is where our old friend the denominator comes in. It seems that there has been an even more rapid rise in the number of college grads in the labor force over the last five years as shown below.

People with a College Degree or Higher in the Labor Force

college gradSource: Bureau of Labor Statistics.

So even though college grads were getting more jobs, they were not getting them at a fast enough pace to keep up with the growth in the number of college grads in the labor force. Just to be clear, college grads were still doing well in the scheme of things. Here's the picture for those at the other end of the educational spectrum, people without high school degrees.

Unemployment Rate for People with Less than a High School Degree

un-less than HS

Source: Bureau of Labor Statistics.

As can be seen unemployment also doubled for people with less than a high school degree, but the starting point was much higher at close to 7.0 percent. In fact, this rise in unemployment understates the true impact of the downturn, since many people without high school degrees simply left the labor force as a result of their bleak job prospects. (This undoubtedly happened with some college grads too, but the effect was likely much smaller.)

The moral of this story is that the recession has hit everyone. This is important because some folks could be led to believe from this employment story that the problem is that we just need more people to get college degrees and then they will be able to find good paying jobs. However, when we bring in our old friend the denominator we can see that this is not true. The problem is simply a lack of demand in the economy. Education helps in a downturn as it does during normal times, but even the most highly educated workers are getting whacked by this recession.

 

 

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Comments (6)Add Comment
Axis Labels?
written by KeithOK, August 17, 2012 11:59
I'm thinking there are probably more than 50,000 "People with a College Degree or Higher in the Labor Force"

Also, 2002 is not usually considered a "Month". I guessing that this is meant to show that the data points are graphed monthly.
Unemployment should be high for Econ. Majors.
written by bailey, August 17, 2012 12:36
Until one Economist explains why "GPD" is an intelligible method to assess our economic well-being, job searching Econ. Majors should be thoroughly vetted to validate their passion for their "science" as opposed to their desire to be paid for singing in a choir. More bluntly:
Why is it in our Country's best interest to print ever more money to insure our Economy "grows" from a grossly & fraudulently inflated position, especially when such a small percentage of our population benefits from this approach?
What Do You Think of The Study Itself?
written by Jeff Carter, August 17, 2012 6:39
The WAPO blog post is referencing an extensive (i.e. long) new study by Anthony P. Carnevale, director of the Center on Education and the Workforce at Georgetown, called "The College Advantage: Weathering The Economic
Storm." There was a lengthier report about the study in The New York Times here:



"After suffering the largest share of job losses in the recession, Americans with no more than a high school education have continued to lose jobs during the sputtering recovery while better-educated people have gained millions of jobs, according to a Georgetown University study."

I'd be interested in your take on the Times piece and, more importantly, on the report itself.
...
written by joe, August 17, 2012 8:32
KeithOK,
1) 50,000,000
2) BLS puts "month" on the horizontal axis because the data is reported monthly. Google LNS13000000 and you'll see what I mean.
Didn't you people play side-scrollers growing up?
written by LSTB, August 18, 2012 7:54
The Georgetown study was written by some of the same folks who gave us the "The College Payoff." (http://cew.georgetown.edu/collegepayoff/) They're motivated to find as large a "college premium" as possible to argue for sending everyone to college. "The College Payoff" suffered from several methodological fallacies, e.g. equivocation, post hoc ergo propter hoc, and omitted variable bias. I don't doubt that the newer study does as well.

Here's their conclusion from "The College Advantage":

The Great Recession that began in December 2007 laid bare many of the shortcomings of the American workforce, especially the lack of workers with postsecondary education. A large majority of jobs lost in the recession and in the recovery had been held by workers with a high school diploma or less. The only real gains made during the still struggling recovery are in jobs filled by workers with at least some postsecondary education. The gradual shift to more-educated workers has been going on for decades, but the recession gave it a mighty push. It also left the country with an urgent need to find a way to train workers for the more skilled jobs.


To them, higher education is like Mario eating magic mushrooms and doubling in size. There's no analysis of why the mushrooms grow Mario, or even if it's just a correlation. It's all just a post hoc assertion that mushrooms grow video game characters so we should feed everyone fungi. Their lack of rigor does not speak highly of our higher education system.

More than Bowser, the end-of-the-level boss they should be worried about is credential inflation.
...
written by jay, August 18, 2012 3:26
Great blog post as usual. I think the one sleeping dragon is the amount of underemployment among college grads due to the lack of demand or even over supply of grads for limited quality positions.

I have not seen a study that shows what impact the recession has had on displacing low-skilled workers with high skill workers in low skill positions. We've heard the anecdotal stories and probably know people in that situation. We have people with PhDs, MBAs, and JDs working in jobs that only require a high school education or even a bachelor's degree.

Just because college grads are getting jobs doesn't mean the grass is greener, especially in light of increased college debt and possible higher levels of consumption that had to be dramatically scaled back due to smaller budgets in underemployment positions.

It just means having a college degree means that you have a better shot at getting the essentials, which means there's not so much "premium" in the college premium right now but people need the credentialing to survive right now.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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