College-Educated Worker Unemployment

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College-Educated Worker Unemployment

Today we want to focus on US unemployment rates for 4-year college educated workers, and here’s why: their joblessness last month hit levels much higher than the Great Recession. Yes, lockdown-related layoffs hurt everyone, but we’ll explain in a minute why this group’s experience merits its own analysis. First, here is a chart with college educated worker unemployment back to 1992 (first data available), with April’s 8.4% rate just barely visible in the extreme right-hand side (picture that red line meeting the top bar and you’ll see how dramatic the change has been):

As with all long run historical analyses of the US labor market, simple ratios like this hide underlying facts. A deeper look shows this graph is worse news than its already worrisome trajectory belies:

  • During the 2009 – 2012 Great Recession, when US unemployment was +8% for 43 months straight, unemployment rates for college educated workers ran at an average of 49.1% of the population as a whole. In April 2020, though, it was 57.1%.

    This shows that a college degree has been less of a buffer against unemployment now than during the Great Recession.
  • During 2009 – 2012, 35.1% of the American workforce had a 4-year college degree. Now, it is 43.6%.

    This means that college-educated unemployment is going to hew closer to the population-wide jobless rate going forward.
  • College educated workers make substantially more than their peers with less formal education, as this 2019 BLS data shows:

    Bachelor’s degree median usual weekly earnings: $1,173
    Associate degree: $836/week (29% less)
    Some college/no degree: $774/week (34% less)
    High school diploma: $712/week (39% less)

Three points to consider about all this:

#1: The thought that college educated workers are all sitting at home on Zoom calls, still happily employed, is wrong. Yes, the jobless rate is lower for this cohort than other educational histories. But thus far the COVID Crisis has been more damaging to this group than the Great Recession, and by a wide margin.

#2: College educated workers both make more and spend more than the rest of the US workforce. Seeing their unemployment rate rise so quickly says we should be cautious about future consumer spending patterns regardless of how quickly the US economy comes back. This is especially true when considering that college educated workers who entered the job market in the last decade likely also have student debt.

#3: They also save more, which means a prolonged period of unemployment could force liquidations of financial assets like retirement accounts to pay ongoing bills. Money flows out of mutual/exchange traded funds have been negative for years, offset by stock buybacks. But the last thing equities need is marginal selling…

As bearish as these points may be, the offsetting positive is that college educated workers should have a better chance of finding new jobs when the US economy recovers if they need to go down that path. How many must make this journey is contingent on how reopenings go, but their higher level of educational attainment should ease any career transitions they need to make.

One last thought: if a college degree ends up neither providing more sustainable employment nor greater chances of finding work in a tough economy, we suspect many Americans will finally start questioning the cost of a 4-year degree. For those that have already spent the money and have the associated debt burden, it is too late. But just as millennials saw their parents struggle with the mortgage and developed their “experience over things” mantra, the next generation of potential college students may come to different conclusions than their forebears on the value of a 4-year degree.