Fed: nearly half of all college grads struggling

Newly minted college graduates typically take a while to find a job. But the current job market has been harsher than usual, with nearly half of recent grads jobless or underemployed, a New York Federal Reserve Bank official said at a media briefing Thursday.

While the unemployment rate for those who hold a bachelor’s degree is now about 6%—below the overall unemployment rate of 7.6%—it represents a historic high, said Richard Deitz, assistant vice president at the Federal Reserve Bank of New York.

It’s also become more common in recent years for college graduates to be underemployed, working in jobs that don’t require a college degree. Underemployment for all college grads hovers at 33%, but for graduates between 22 and 27 years old, that number shoots up to 45%.

“Recent college graduates are having more difficulty finding jobs than college graduates in previous generations,” Mr. Deitz said.

Underemployment is most prevalent for workers in their early 20s—more than half of 22-year-old graduates have jobs that don’t require a college degree. For 27-year-olds, the rate is 40%.

Courtesy NY Fed

“You always have a lot of young college grads working as baristas,” said Heidi Shierholz, an economist with the Economic Policy Institute. “The reason it is so high right now is part and parcel of the overall weakness in the labor market.”

Younger graduates are also the most likely to be jobless despite attempting to find work. The unemployment rate for 22-year-old college grads is higher than 10%. That number drops to 4% by age 27.

“Even during good economic times, unemployment for young college graduates tends to be higher, but it declines with age,” Mr. Deitz said.

Ms. Shierholz said that young workers can be particularly vulnerable to economic downturns because of their age.

“Young college graduates are hurt by their youth, but helped by their high level of education,” she said.

A graduate’s major is still influential in determining job prospects. Degrees in engineering, education and health result in the best employment outcomes, the Fed’s numbers show. Three-quarters of graduates in those three fields are working in jobs that require a college degree. At the bottom of the scale, only a third of leisure & hospitality majors have jobs that do.

Ms. Shierholz said that on average, the additional earnings a college graduate can expect still make up for the cost of a college education.

But “the calculus isn’t as clear as it used to be,” she said. “It’s much more expensive to go to college, and the payoff is growing much more slowly.”

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