College grads face tough times in the job market
The unemployment rate in the Gen Z population, those born between 1997 and 2012, is edging up to 7% compared to the nation's overall employment rate of 4.3%. That is the highest gap the country has seen in 30 years. For entry-level college grads, aged 22 to 27, the number is roughly 5.8%—the highest level in a dozen years.
Fed officials and private sector economists have been quick to point out that the uncertainty created by the Trump administration's tariff increases is a major cause of reluctance among businesses to hire young, inexperienced workers. That makes some sense since entry-level jobs are the first to go in times of economic uncertainty.
Job openings in June fell to a post-pandemic low, but the rate of layoffs also stood near a record low, which is a good sign for the broader U.S. economy. Companies are reluctant to cut jobs because of the chronic labor shortage. They are worried they won't be able to rehire enough experienced people when the economy speeds up.
Young Gen Z workers are struggling to find jobs. Economists blame the uncertainty of tariffs, and, among white-collar workers, Artificial Intelligence is also taking its toll on entry-level college grads.
One interesting development is that the unemployment rate is just about the same regardless of whether the applicant holds a college degree. If one looks at overall job openings, there are still millions of jobs available, but many of them do not require a college degree. Corporations are realizing that an automatic college-level degree requirement for many entry-level jobs in their screening process is superfluous.
Over many years of writing these columns, I have addressed this subject on several occasions. I urged readers and their children alike to reconsider the worth of a trade school education versus a college degree. For those interested, check out my February 14 and 21, two-part, 2013 columns "Trade Schools versus College."
Fast-forward to today, where at least some readers have taken my words to heart. The overall share of young college students has declined by about 1.2 million between 2011 and 2022, according to Pew Research Center. Enrollment at two-year vocational public schools has increased by 20% since 2020. It appears that we are finally realizing that vocational careers are enormous opportunities that pay exceptionally well.
History still says individuals with a bachelor's degree earn $1 million more over their lifetimes than those with a high school diploma and $500,000 more than those with an associate's degree. Of course, the area of study in college is important as well. Over the last decade or so, for example, many students realized that jobs for graduates with a Liberal arts degree were scarce. Those who were lucky enough to land an entry-level position found that their salaries were less than what high school grads were making in fast food chains. This convinced many students to find more lucrative fields of study.
"You can't go wrong with a degree in technology" became the mantra of the day as college enrollment surged in programs leading to entry-level jobs in computer system design, related tech fields, and mathematical and computer sciences. Unfortunately, over the last few years, these areas have been among the first to feel the brunt of the increased adoption of artificial intelligence systems.
The professions where hiring is still exhibiting some modest gains are in health care, government, restaurants, and hotels. We all know that government jobs, thanks to Doge, are among the riskiest fields to enter, while restaurants and hotels rarely require an upper-level education degree. Healthcare occupations are projected to grow much faster than the rate of all professions, around 1.9 million openings each year, according to the Bureau of Labor Statistics. It is also recession-resistant, as more Baby Boomers require more healthcare.
Gen Z, at 70 million people, accounts for 20.81% of the U.S. population. Politically, this age group has traditionally leaned left, but that shifted somewhat during the last presidential election. For the first time ever, Gen Z voters backed more Republicans (47%) than Democrats (46%). The shift is widely attributed to economic frustration, discontent with President Biden, and the GOP's outreach to young people on social media.
However, over the last few months, support for the GOP has wavered, according to the latest data by the Pew Research Center. Gen Z has swung back to favoring Democrats by 49%, while Republican support has dropped to 43%.
How much of that dissatisfaction is due to the economic frustration of unhappy college grads remains to be seen. Last year, according to the World Population Review, there were more than 20 million students enrolled in colleges and universities in the U.S. Just a quarter of that total would be more than enough to swing sentiment, especially in a period of populism and partisanship. Remember that in a populist era, voters are quick to reject candidates and political parties that fail to deliver and deliver quickly on their promises.
The good news for college grads, if there is any, is that the economy is still growing. If the Trump plan to grow the economy at 3% per year pans out, and immigration continues to slow, there will still be plenty of jobs for Gen Z college grads. They may not be in their chosen field, but a job is a job. And if they really want to make money, try plumbing or electrical work.
Bill Schmick is a founding partner of Onota Partners, Inc., in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners, Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at billiams1948@gmail.com. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal