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Recent college graduates face a remarkably inhospitable labor market as businesses pull back on hiring, and now suffer even higher unemployment rates than the general U.S. population. Were that not daunting enough, Gen Zers who often assumed heavy student debt loads to pursue higher education can now check to see which degrees are the least useful in securing work these days.
As companies react to uncertainties from import tariffs, mass deportation of immigrants, and clashing indicators about the economy’s health, most U.S. employers have essentially stopped hiring. That precautionary move by businesses to neither increase nor cut headcounts has led to anemic job creation since May. That’s hit recent college grads hard. According to data published by the New York Federal Reserve bank in August, the unemployment rate for diploma holders aged 22 to 27 years old increased to 4.8 percent, compared to the current 4.3 percent national average.
More recent statistics from the Federal Reserve Bank of St. Louis measured the jobless rate of those recent college graduates at a slightly lower 4.59 percent. Yet that still marks “a stark contrast to the 3.25 (percent) rate this same demographic experienced in 2019,” it said. It noted that newer entrants to the workforce constituted 10.8 percent of the entire jobless population at the end of August.
A notably uninviting labor market for recent degree earners reflects two major shifts in company hiring practices and priorities.
First, diplomas that were formerly considered a near guarantee for landing work have lost the power to unlock doors to career-track jobs, as businesses start prioritizing experience and skills — especially using artificial intelligence — over formal education. Second, the so-called college wage premium that often earned degree holders over 80 percent more in pay than non-graduates has fallen to about 25 percent now, especially for people whose majors are in less demand.
“If you’re a college grad and you are underemployed, you’re basically making the same money as a college dropout on average,” said St. Louis Fed economic policy advisor Oksana Leukhina in a recent post on the bank’s site. Many plumbers, contractors, or mold inspectors now earn considerably more, she added.
That shift in hiring and work priorities mean a growing number of college graduates are questioning the value of their educational investments. Now, thanks to recently released data by the New York Fed, those Gen Z job hunters can get a better idea — and perhaps a larger dose of dread — about exactly which degrees suffer the highest underemployment rates.
The NY Fed found people who earned diplomas in criminal justice are the most affected, with a 67.2 percent underemployment rate. They were followed by majors in performing arts 62.3 percent, medical technicians at 57.9 percent, liberal arts at 56.5 percent, and anthropology at 55.9 percent.
Diploma holders with the lowest levels of underemployment were elementary education students at 16.1 percent, miscellaneous education specialists at 16 percent, and nursing grads at 9.7 percent.
One factor shaping those rankings is the shift of business sectors now creating the most jobs.
Healthcare businesses led that hiring push for most of the past year, explaining the low underemployment rates for nursing degree holders. Strong recruitment by booming building companies similarly explains the relatively low 21 percent underemployment rate for construction services graduates.
But Leukhina suggests another factor is the changing attitudes toward the inherent value of college degrees as the primary indicators of a job candidate’s continual learning capacities, adaptability, and increasing capabilities. That means the days may well be over when students could earn a diploma in a field they cared about most — even if it had little practical business application — and use that as their ticket into the labor market to land work they could learn on the job.
As an example, the St. Louis Fed article cited the underemployment rate for criminal justice majors as a reflection of how a degree may no longer be considered necessary, or even desirable by certain employers.
“(L)aw enforcement and security guard positions don’t tend to require college degrees, which could account for the higher underemployment rate for those majors,” it said. “Grads with majors in these fields undermatch at rates of 57 (percent) or higher.”
Still, a New York Fed analysis earlier this year found that even after accounting for student loan repayments and other costs, the average college graduate continues benefitting from a comparatively easier time finding work than non-grads — and being paid more once they do. But as Gen Zers are learning to their increasing dismay, both of those advantages appear to be weakening, if not gradually vanishing as the labor market transforms.
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Bruce Crumley
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