This year’s graduating seniors faced remote learning due to the COVID pandemic and now confront a cooling job market post-college. Recent job growth, averaging 245,500 per month, mainly occurred in industries like leisure and retail, often offering non-degree hourly work. April saw a notable decline in government hiring, indicating a potential halt in the previous year’s job expansion.
A survey from the National Association of Colleges and Employers predicts a 6% decline in hiring compared to 2023. Payroll provider Gusto reports the new grad hiring rate is now about 6%, down from 10% in 2021.
Securing the first job out of college is crucial but stressful for graduates needing to cover living expenses. About 40% are “underemployed,” working jobs that don’t require a degree, per the Federal Reserve Bank of St. Louis. It’s important to not under-emphasize the importance of the first job in shaping a career, noting that not all graduates can afford to be selective in a challenging job market.
Let’s dive into what the numbers suggest and why now is a tough time to be entering the workforce.
The Statistics
The outlook for new graduates is better than four years ago when they started college during a pandemic-affected economy. However, they still face high-stakes questions about inflation and labor market softening. San Francisco Federal Reserve Bank President Mary Daly reassured graduates about entering a strong labor market with real wage growth despite recent tech layoffs, highlighting ongoing opportunities in the tech sector.
The job market for recent college grads has worsened compared to the general population and pre-pandemic levels. Over the past year, the unemployment rate for graduates aged 20-24 averaged 5.8%, up from 5.1% in 2019, while the overall U.S. unemployment rate averaged 3.7%. This year’s graduates face a professional workforce and economy reshaped by the pandemic.
Gusto reports that the top industries hiring new college grads are legal, nonprofits, arts and entertainment, health care, social assistance and construction. Graduates with relevant skills will likely see more interest in their resumes, noted economist Liz Wilke. However, the National Association of Colleges and Employers found that computer and electronics manufacturers plan to cut new hires by about 12%, and financial firms expect a nearly 15% decline.
What the Market Is Looking For
Businesses are seeking AI skills from younger workers, believing they are better equipped to utilize this technology, said Wilke. The hiring pullback follows a tight labor market with fewer resumes following the pandemic. Chris Jones, founder of Planting Seeds Academic Solutions, noted an increase in applicants per opening, from 20-30 in 2021-2022 to 50-100 now, as many are willing to work in person again.
However, hiring has returned to a “normal” pace. A year ago, ensuring staff punctuality was challenging and costly, but now the power dynamic is more balanced. Clark advised new grads to hustle and persevere, acknowledging that landing the first job can be challenging.
Employers project a 5.8% decrease in hiring for the class of 2024. Despite this, industries facing staffing shortages like education and construction continue hiring new college graduates. LinkedIn identifies top hiring industries and roles, advising job seekers to target rapidly hiring sectors for better prospects.
In 2023, tech firms showed caution in hiring entry-level roles, preferring experienced candidates. However, education saw a 15% increase in hiring recent graduates. Health care and government, facing staffing shortages, offered abundant opportunities despite the pandemic. Economist Kory Kantenga advises new grads to explore beyond their majors.
What the Fresh Grads Are Looking For
New grads seek hybrid roles with in-person and remote days. They are particularly concerned about salary and fear underemployment. They reportedly want to discuss salary during the interview and might not pursue jobs if the salary isn’t addressed.
In high-cost cities like New York, which accounts for 10% of new grad hires, starting salaries average $64,134. Adjusted for living costs, this equals $28,500 in other cities. Wilke advised grads to consider cities and job opportunities carefully.
Bottom Line
According to Joseph Mercadante from NYU Wasserman Center for Career Development, the healthcare and government sectors sought young professionals with tech skills. The latest Labor Department report showed part-time positions were available in retail, transportation and healthcare. While unemployment stayed low at 3.9%, white-collar hiring slowed and job switching decreased.
It’s going to be a tough job market for new graduates to enter into. However, as with previous periods of turmoil (such as during the GFC, when I first entered the job market), things will work out over time. Now’s the time for patience and consistency, and I think most experts would agree on that.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
