Why The Job Market for College Grads is Not Likely to Improve Any Time Soon
Dr Mark Naison
One of the hardest things about being professor these days is watch my best recent graduates have difficulty finding jobs. During the last two months, I have fielded at least ten requests from students to refer them to job openings that I know about, and to my great distress, I have not been able to place a single one of them in a vacant position.
This is highly unusual. During a normal spring, I would receive at least five personal requests from heads of government agencies or non profits in the Bronx to have one of my top Urban Studies graduates apply for a position in their organization, along with at least thirty emails advertising jobs my students could apply for. This spring, the number of personal requests has fallen to zero, while the email postings have been less than five. As a result, I have been forced to advise my grads to take any work they can find, be it babysitting and housecleaning, restaurant work, home and auto repair, while sharing living space and food cooperatively so they can live on far less income than they expected.
I wish I could say that this situation will improve soon, but based on the economic indicators I have seen, I don’t expect to see substantial job growth for the 20 to 30 year old age cohort for at least five years.
Here’s why. For the last twenty five years, the major engine of economic expansion in the US has been consumer spending. When the recession hit, fully 70 percent of economic activity in the nation was consumer generated. But this explosion of consumer spending, which took place at all levels of the society, was not, for working class and middle class Americans, based on an expansion of real wages or per capita income. Rather, it was fueled by easy access to credit that came from two sources; credit cards and second mortgages on homes.
In the current economic crisis, both of those sources are drying up. As home values have plummeted, working class and middle class families have lost their ability to finance major purchases be taking out home loans; in fact, many are hard pressed to meet their existing home payments and are in danger of falling into foreclosure
As for credit cards, banks are raising interest rates, tightening eligibility requirements and imposing punitive fees on late payments. More and more consumers are radically curtailing credit card use, while others simply cannot get access to credit cards that banks and finance companies were once giving away
Neither of these restraints on consumer credit are likely to ease. Despite the TARP program and the bailout, many of the nation’s banks, especially small local commercial banks, still have so many toxic assets on their books that they are in danger of failing. The commercial real estate market, in which many banks are invested, is in as bad shape as the housing market ( if you don’t believe me, count the number of vacant stores in your local neighborhood or at the nearby mall). Given their fragility, banks are looking for any excuse to deny people loans, or granting loans only at extremely high interests rates. They are also piling on huge fees on their individual customers to generate revenue
What this means is that American consumers cannot use easy credit to compensate for the loss of jobs, and the loss of income that so many are experiencing during the current economic crisis (which some economists are calling THE GREAT RECESSION) The Obama Stimulus plan is giving some of them enough extra income to keep their heads above water, but just barely. In anticipation of continuing hard times, consumers are saving at a rate that hasn’t been seen in over 20 years.
As consumers retrench, government doesn’t have the power to inject enough income into the economy to reproduce pre-recession employment levels.. By the beginning of
2010, the double digit unemployment levels we are seeing may stop getting worse, but we are likely to see those levels persist until new engines of economic growth appear
Where they will come from is anyone’s guess. Perhaps health care, perhaps environmental technology, perhaps transportation, perhaps new forms of agriculture, perhaps education or international trade. But until that happens, job creation will come too slowly and painfully to help this year’s graduates, and probably several years of graduates to come.
If they take their situation as a challenge, the consequences may not be that tragic. It is their creativity, inventiveness and entrepreneurial skill that may well be the engine for the new kinds of growth we need
But that will not happen until young people realize that the jobs they once expected are not going to magically reappear. They are going to have to learn to share, live with less and become much more flexible and imaginative in developing living arrangements and finding new sources of income
August 17, 2009.