Employers hired more waiters, tradespeople, retail clerks, healthcare technicians, and assembly line workers in January, as the overall economy created a robust 257,000 new jobs. But the hottest segment of the job market entails white-collar workers with a college degree.
The demand for college grads in a variety of professions has become so strong that some analysts worry about an imminent labor shortage. “These educated workers are the most productive in our information economy, and at some point in the coming year, we’re going to risk running out of new, productive people to employ,” Guy LeBas of investing firm Janney Capital Markets wrote in a research note following the release of the January job numbers. “That comment would have been unthinkable just 12 or 18 months ago.”
The unemployment rate for workers with a college degree has fallen to 2.8%, after peaking at 5% in 2009 and 2010. It’s been lower, as the chart above shows, but any group with unemployment below 4% ought to be thriving. The unemployment rate for the overall population is now 5.7%.
If there’s one caveat to that generalization, it’s that every college grad with a job isn’t necessarily earning good pay. Grads who majored in one of the STEM fields—science, technology, engineering or math—might get multiple job offers, while other college grads work at low-paying jobs that don’t even require a degree, because it’s all they can find. And some older college grads have drifted backward in their careers after losing one job and taking another that pays less. With obligations such as kids or a mortgage, any old job doesn’t necessarily cut it.
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But economists think the current hiring binge will soon lead to rising wages and better jobs, and the long-term outlook is even more encouraging. Consulting firm McKinsey predicts a shortage of 1.5 million college-educated workers in the U.S. by 2020, as employers develop a need for more high-skilled workers than universities produce. In some fields, such as technology, finance and accounting, the shortage could be more acute (and the pay eye-popping).
That doesn’t mean employers will be throwing money at every doofus with a diploma. Other factors will still matter—area of expertise, location, work ethic and the ability to play well in the sandbox. But growing demand for well-schooled workers, if it materializes, should help boost earning power in much of the labor force. It would obviously be great for people in the hottest jobs. Plus, as college grads work their way up the chain it ought to unclog an oversupplied labor market in which many college grads work at jobs for which they’re overqualified. That would create more openings for lesser-skilled workers and perhaps even give some a chance to stretch beyond their capabilities.
There’s a lot of labor-market slack that still needs to be absorbed before any of this happens. Young people — including college grads — remain unemployed and underemployed at far higher rates than older folks. As a result, nearly half of all 25-year-olds live with their parents, a “coresident” rate that’s 20 percentage points higher than it was 15 years ago, according to the New York Federal Reserve. The main reason, in addition to a lousy job market, is a student-debt burden now close to $30,000 per borrower.
Some grads may regret taking on so much debt to get a college degree, but it will still end up worth it for most of them. The typical pay of a college grad is nearly twice that of someone who only has a high-school diploma , and the gap is rising, not falling. Students and their families have been getting smarter about financing college, by going to less expensive schools, for instance, and finding ways to pay as they go instead of racking up tons of debt. President Obama’s plan to provide federal funds for two years of community college may never get off the ground, but it does highlight a smart higher-ed alternative many students have begun to seek on their own, and many such students go on to get a college degree. It doesn’t really matter how you get to college—it just matters that you leave with a diploma.
Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.
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