Connor Reyer gave up after more than a year of looking for a job in his preferred field of forest resources following graduation from the University of Georgia in Athens, finally opting in February for a hotel front-desk job paying $10 an hour.
The relegation of college graduates to non-degree positions was once seen as a temporary blow for young people unlucky enough to graduate around the time of the deep 2007-09 recession. Instead, millions of Americans like Reyer continue to face the same struggle.
About 44 percent of recent college grads were employed in jobs not requiring degrees in the final quarter of 2016, not far from the 2013 peak of 46 percent, while the share of that group in low-wage positions has held steady, data from the Federal Reserve Bank of New York showed last week.
That’s a sign that the nation’s labor market isn’t at full health, despite an unemployment rate of 4.5 percent in March, the lowest in almost a decade. In fact, the elevated level of college grads in non-college jobs could mean there’s still slack and that the Fed can go slow in raising interest rates, betting that more high-wage jobs will materialize. It could also mark a more permanent shift in employment that the Fed can’t fix and be a tough challenge for President Donald Trump and Congress.
Fed Chair Janet Yellen and colleagues on the Federal Open Market Committee have mostly regarded the poor outcomes of college grads as a structural challenge outside of their control. The idea is that fiscal policies are better equipped to ensure students’ learning prepares them for the demands of employers, as opposed to the phenomenon being a cyclical issue where more monetary easing could bolster outcomes.
“There is something going on suggesting that conditions are a bit worse than during the early 1990s,” said Jaison Abel, a New York Fed economist who has led the study of the issue. While cyclical and structural changes have contributed to the rise, “a combination of both” causes is likely responsible.
While Yellen cited a barrage of positive data in March as the central bank raised interest rates for the second time in four months, the chronic underemployment of college graduates points to a need to continue to stimulate growth, according to some analysts.
“This is evidence in support of the view that we are still facing an aggregate demand deficiency — that there’s still a lot of slack in the labor market,” said Jesse Rothstein, a former Labor Department chief economist now at the University of California at Berkeley. “What can be done about it? The Fed can stop acting like we are at full employment and can continue with loose monetary policy.”
Other indicators suggest there’s still some labor-market slack. Labor-force participation for prime-age workers — those ages 25 to 54 — was 81.7 percent in February, down from 83.4 percent in January 2007. Wage growth has been lukewarm, too: Average hourly earnings rose 2.8 percent in February, by 0.2 percent in March compared with 3.6 percent in June 2007, prior to the recession.
Yellen has cited Yale University research as highlighting the importance of a strong economy at graduation. Those entering the job market in 2010 and 2011 took a 19 percent pay cut from what they could have expected without a recession, according to economists Joseph Altonji, Lisa Kahn and Jamin Speer.
Yet the economic recovery, with job openings doubling since 2010, has hardly erased the problem.
Having such large numbers of underemployed college graduates “is a waste of resources,” said St. Louis Fed President James Bullard, who has argued the Fed doesn’t need to raise rates further over the next few years. “If you put all of those people in the exact right jobs, you would get higher productivity,” he said.
The percentage of underemployed college graduates in “good” or high-paying jobs has dropped steadily since 2014, while the share in low-wage roles has been stagnant at around 8 percent.
The Fed research shows various reasons for the phenomenon. Graduates might be in fields with scarce jobs, such as liberal arts, or they might be unable to relocate, or they could have family obligations. Some jobs with decent pay, such as police officers and salespeople, don’t typically require degrees.
“The reversal in demand for cognitive skills,” following the information-technology boom of the 1990s, is one likely explanation for the high underemployment among the college-educated, Abel said.
More highly skilled workers in various fields are needed when productivity is booming. Productivity gains have averaged 1 percent a year since the recession, compared with 2.2 percent in the 1990s.
“Since then, technological change has been more stagnant,” said Paul Beaudry, an economist at the University of British Columbia in Vancouver. While monetary policy can play a role in stimulating growth, “the solutions require more involvement by the fiscal authorities, and such involvements are not easy to design,” he said.
Reyer, 22, said he thought his qualifications and degree would be enough. At school, he was active in student groups, including being president of the Fisheries Society. He has also volunteered at a children’s shelter.
Yet the December 2015 graduate realized he wasn’t going to get placed when he lost a $10.50-an-hour technician job to someone who had earned a master’s degree, something he was unwilling to pursue.
Even so, Reyer said he remains upbeat and sees opportunities for someone willing to work hard.
“I can see a future in the hotel industry,” he said. “I can see myself in management. I really like working with people.”