Anna Herhoski, NerdWallet via Paradise Post, Paradise, Calif. (TNS)
Despite the prevalence of TikTok videos and recent articles detailing how college graduates struggle to find good jobs, the data tells a different story.
After all, the overall job market is the strongest it’s been in decades, and recent college graduates of Gen Z are arguably better off in most ways than previous generations of college graduates.
“For recent college grads, the opportunities aren’t as plentiful as they were a few years ago,” says Nick Bunker, director of North American economic research at Indeed Hiring Lab, “but the labor market remains relatively stable, and hopefully, that market will remain strong for the next few years, giving you a better chance of finding work than sitting around doing nothing for six months after graduation.”
Comparing the job market facing Zoomers to previous generations, recent college graduates are better off than those who came before them: Zoomer graduates are earning much higher salaries than Gen Xers did in the mid-1990s. Inflation may eat into Gen Z’s higher wages, but it won’t be as bad as the stagflation of the 1970s and 1980s that Baby Boomer college graduates experienced.
The short-term downturn that Gen Z experienced at the start of the pandemic technically lasted less than two years, but it was a stark difference from the Great Recession, which was followed by several years of sluggish economic growth that likely hurt millennial graduates during their critical early career years and negatively impacted their lifetime earnings.
“It’s not just the year you graduate that matters,” Bunker says, “but the first few years are probably going to make the most difference, because that’s when you start climbing the career ladder.”
Gen Z recovered quickly
Even though the oldest members of Gen Z, the class of 2020, entered the job market with the highest unemployment rates of modern times, that recession lasted just two months — and was followed by one of the strongest economic recoveries in history.
The U.S. unemployment rate has fluctuated between 3.4% and 4% since December 2021. The current unemployment rate of 4.1% remains the lowest in the past 50 years, meaning that Zoomer college graduates are more likely to be able to enter the workforce and advance in their careers immediately after graduation.
Bunker said the job market is cooler than it was two years ago: There’s far less competition among employers than there will be in 2022, meaning fewer opportunities, he said, but in the broader picture, it’s not a dramatic change.
“If you go back a little bit and compare it to pre-pandemic, it’s pretty much at that level,” Bunker said, adding that compared to previous generations of graduates, job opportunities are roughly on par with those enjoyed by millennials who graduated from college in the early 2000s.
Gen Z’s unemployment rate is unusual
Despite the many positive aspects of the current labor market, recent Gen Z graduates still face a unique trend that previous generations never faced: higher than overall unemployment rates.
This is a particular anomaly that can be seen when analysing unemployment data for recent graduates over the past 30 years: the unemployment rate for recent graduates as of March 2024 was 4.7%, one percentage point higher than the overall unemployment rate of 3.7% at the time.
This is an unusual development: Before 2018, the unemployment rate for recent graduates was consistently lower than the overall unemployment rate, as employers sought more highly educated workers.
The reversal is likely due to a surge in demand for non-college-educated service workers since the pandemic began.
Underemployment rates for new graduates remain high
Labor data shows that underemployment (the percentage of people with a college degree who are working in a job that doesn’t require a degree) is consistently higher among recent graduates compared to all bachelor’s degree holders.
“They get a college degree, but they can’t get a career that uses that education,” said Elise Gould, a senior economist at the Economic Policy Institute, a nonpartisan think tank.
It doesn’t help that certain jobs are becoming more crowded: Computer science majors, for example, are no longer a guaranteed job as tech companies shy away from hiring.
According to a February 2024 report by labor market analytics firm Burning Glass Institute and the Strada Education Foundation, computer science students are more likely to be underemployed than students in health-related programs, education, and engineering. However, compared to students in social sciences, psychology, humanities, and business administration, computer science students are less likely to be underemployed.
As of March 2024, about 40% of recent graduates are working in jobs that don’t require a degree, compared with 33% of all college graduates, according to data from the Federal Reserve Bank of New York.
Salaries for new graduates soar
Gen Z college grads can expect higher salaries than ever before when they enter the workforce: A typical recent graduate from a four-year college can expect to make roughly $62,609, according to a ZipRecruiter analysis of company job postings and third-party data sources. That’s in line with the median annual salary of $60,000 for recent graduates with a bachelor’s degree, according to the Federal Reserve Bank of New York.
As the chart below shows, today’s average salary, adjusted for inflation, exceeds that of previous generations of new graduates.
Though recent graduate salaries are peaking, recent generations may not be earning as much as they expected. According to a survey published by Real Estate Witch, a housing market research and review site, 2023 graduates can expect to earn about $85,000 in their first job, while the minimum salary they will accept is about $73,000. However, Real Estate Witch found that the average starting salary for new graduates is about $56,000.
“For young people graduating today, the gap between expectations and reality may be quite large,” Bunker says.
Liv Wang, a senior data scientist at the ADP Research Institute, which measures labor force data, said wage gains for young new hires may also be plateauing because the overall labor-market momentum that was driving wage growth has now slowed. “If you look at 23- to 26-year-olds, which includes a lot of recent college graduates, their average hourly wage is about $17, and that hourly wage has barely changed since June 2022,” Wang said, citing recent ADP data.
And yet, as Gould points out, younger workers are disproportionately low-wage earners, even those with college degrees.
Gen Z graduates face economic and employment uncertainty
Today’s college graduates entering the workforce aren’t immune to financial problems. They have to contend with rising inflation that eats into their wages. And if you’re earning less, like most young workers, rising costs hit you harder. Housing costs have skyrocketed in recent years, especially for rental properties, as have the costs of health insurance and car ownership. And Gould says that young workers just out of college with student loan debt, like previous generations, will have an added burden to shoulder.
While salaries may be higher overall than they’ve ever been, they vary by degree, and there are still persistent gender and racial inequalities in earnings, Gould said.
But again, the data shows that it’s still a pretty good time to graduate from college and get a degree in general.
Getting a college degree is still worth it
According to an analysis of U.S. Census Bureau data by the Federal Reserve Bank of New York, people with a college degree are more likely to be employed than workers in the same age range between 22 and 27 years old. With a shortage of middle-skilled workers in many parts of the country, even having an associate’s degree or professional certification can give younger workers an advantage.
In March 2024, the unemployment rate for new graduates aged 22 to 27 was 4.7%, compared with 6.2% for all young workers in the same age group.
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