Young college graduates face weak labor market
Young college graduates, those age 25 to 35, are facing a tough labor market this year. These well-schooled individuals—who possess at least a bachelor's degree, and in some cases, an advanced degree—would be expected to fare better than those without because demand for their skills would insulate them from labor market fluctuations. However, employment trends of the last four years indicate just the opposite. While positive signs of increased employment for these young college grads began to surface in 2004, wages are still on the decline and the incidence of health insurance, particularly employer-provided health insurance, is falling.

The real hourly wages of young college graduates have fallen for the third year in a row. After growing strongly during the tight labor market in the latter 1990s, there was a sharp turnaround in wages in 2001, and wages have been falling ever since. Between 2001 and 2004, the wages of young college graduates dropped from $23.04 an hour to $22.41 an hour.

Employer-provided health insurance is down among college grads
Since 2000, the peak year of the business cycle, the incidence of employer-provided health insurance among young college graduates has fallen three percentage points, from 87.3% in 2000 to 84.2% in 2003 (the most recent data year available). While this decline in employer-provided health insurance spurred more young college graduates to purchase health insurance in the private market, many have joined the ranks of the uninsured.

Much of the wage loss and absence of health coverage can be attributed to the lack of employment growth. Compared to the last "jobless recovery" of the early 1990s, employment rates of young college graduates are still flailing. In 1989, the peak year before the last recession, the employment rate for this group was 87.7%, similar to their employment rate at the most recent peak year (87.4%). Four years later, by 1993, the employment rate of young college grads had picked up to 87.2%, as compared to only 85.2% four years after the 2000 peak.

As shown in the figure below, the employment rate did pick up between 2003 and 2004 (one percentage point), but it is still far below the rates experienced in the mid-1990s through 2000, when employment exceeded 87.4% each year. It has been 20 years since young college graduates have experienced employment rates as low as those in 2003 and 2004.

Though overall employment finally seems to be turning around, this moderate employment growth has done little to compensate for the losses during the recession and jobless recovery. Young college graduates are still facing lower real wages than they did four years ago. At the same time, lower employment rates and rising health costs have reduced their employer-provided health insurance coverage. Until employment rates continue to climb steadily, picking up the slack in the labor market, these young workers will not have the power to bid up their wages and benefits.

Job recovery slowly regains ground
After payroll jobs increased by 274,000 in April, they are now up 782,000, or 0.6%, compared to the start of the recession four years ago (March 2001). Following the increase of 256,000 in private-sector jobs, payroll jobs are just short of pre-recession levels, lagging by 22,000. The 804,000 jobs created in the government sector since March 2001 explain the difference between growth in total payroll and private-sector jobs. In the three downturns since the early 1970s, the economy had not only recovered all the jobs lost during the recession but had also generated 6.6% more jobs (6.7% more private-sector jobs) than existed at the start of the recession.

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