Wednesday, May 26, 2010
New College Grads Facing Stark Employment Prospects
An annual right of spring – college graduation – has begun around the nation. Each graduate possesses hopes and dreams and, for many. large debts.
According to the College Board, a quarter of graduates from private colleges leave with more than $30,000 in debt. And more than half of those going to for-profit schools owe even more.
The College Board also says that too many students are borrowing more than they're likely to be able to manage down the road.
Entering the work world – especially this very tough job market – with a tens of thousands of debt is more than just a tough start; it can lead to years of indebtedness that can be difficult to eliminate due to interest payments. Many students won't be able to find the jobs needed just to begin paying off student loans that are due in only six months.
The class of 2010 will produce 1.6 million new college grads who will flood an already crowded job market facing 10 percent unemployment. Prior graduates from the 2008 and 2009 classes are still looking for entry-level jobs.
Those college graduates are just one part of an ever expanding labor force in need of employment, and they are joined by this year's high school grads who will not be attending college, mothers returning from maternity leave after months or even years, and military personnel returning from two wars.
Unfortunately, there aren't nearly enough available jobs for all of these potential workers.
To provide some perspective of the challenge we face as a nation, consider this: the government says that 1.3 million jobs needed to be created every year from 2006-2016 just to keep up with the growing labor force.
That's not even close to happening.
As it stands, there were already about 1.2 million unemployed recent college grads in America. The average graduate is carrying $20,000 in student loans. Those loans can't be paid off without jobs.
According to the National Association of Colleges and Employers, job offers to graduating seniors declined 21 percent last year, and are expected to decline another 7 percent this year.
Unemployment among people under 25 years old was 19.6 percent in April, the highest level since the Labor Department began tracking the data in 1948.
Collectively, nearly 16 million Americans remain jobless. That number doesn't include those who have lost unemployment benefits and are no longer counted. Nor does it count workers relegated to part-time jobs.
According to Gallup, the under-employment rate has increased to 20%. That number includes not only the unemployed, but also part-time workers who want full-time work.
Of particular concern, a total of 46 percent of the unemployed have been out of work for at least six months, the highest in at least six decades.
The US doesn't only have to make up the eight million, or so, jobs wiped out during the Great Recession; it also needs to keep up with the growing labor market. The economy has to add about 150,000 jobs a month just to absorb the annual increase in population and the entrance of new people into the workforce, such as college grads.
The economy would need to grow by 5 percent for all of 2010 just to lower the average jobless rate for the year by 1 percentage point, and even then unemployment would still be nearly 9 percent.
That's highly unlikely. Absent government stimulus and intervention, the economy will be quite challenged to grow at 5 percent, or anything close to it.
The hard reality is that US companies need to add at least 250,000 jobs monthly in order to significantly reduce the unemployment rate from its current 9.9 percent and return it to a more acceptable level of 6 percent.
That's a daunting prospect. And so is this:
Even if the nation started adding 2.15 million private-sector jobs per year starting this past January, it would need to maintain this pace for more than 7 straight years (7.63 years), or until August 2017, just to eliminate the current jobs deficit.
That's bad news for the nearly 16 million Americans currently out of work, and for all those new college grads carrying oodles of debt.