Good News for Recent Grads in Friday’s Jobs Report?

May 27, 2016

This June, a fresh batch of new college grads will enter the workforce. What should they expect from the labor market? This Friday’s monthly jobs report offers clues about the prospects facing young workers from the Class of 2016.

Here’s what we’re watching for:

  • 181,000 new jobs added to nonfarm payrolls in May.
  • Unemployment rate down to 4.9 percent.
  • Average hourly wages up 2.5 percent from one year ago.
  • Labor force participation rate down to 62.7 percent.

Timing Matters for Grads

For young workers entering the labor force, being lucky enough to graduate into a strong labor market can have a huge impact on wages and career prospects.

Research shows college students who graduate during a recession, especially severe ones like the most recent Great Recession, face big initial earnings losses—about 9 percent lower salaries on average. Even worse news for grads unlucky enough to complete their degrees during an economic downturn? Those effects on salaries can last a decade or more.

By some measures, the long shadow of the Great Recession can still be seen on the labor market prospects for young workers. Research shows that—at least as of one year ago—young grads still faced higher unemployment rates, lower wages and are more likely to be underemployed in jobs that don’t require a college degree than grads who entered the labor market before the last recession.

However, the labor market has continued to improve over the past year. Today, it is in remarkably good health.

Outlook for New Grads

In terms of the labor market, 2016 is a great year to graduate. Average job growth today is chugging along a healthy pace of 192,000 new jobs per month so far this year. Despite recession fears due to a weak energy sector, tightening Fed monetary policy, and stock market volatility early in the year, there is no end in sight to today’s nearly seven-year-long economic expansion.

The U.S. unemployment rate is hovering at 5.0 percent, a level most economists consider “full employment.” Many metro areas most popular with new grads are well below that level, including San Jose (3.9 percent), San Francisco (3.8 percent), Portland (3.1 percent), Boston (4.0 percent), and Denver (3.3 percent). And there are a near-record 5.76 million open jobs in America right now.

At Glassdoor we see the fastest-growing jobs with the most open positions in tech, healthcare, finance and consulting. In terms of tech jobs, this is the best job market in a generation for young people graduating with STEM majors—including computer science, statistics, mathematics, and engineering—who have the most up-to-date coding and technical skills in-demand across a variety of industries.

Another trend that is fueling tech job growth is that traditional “tech jobs” have diffused out of the “tech” sector in recent years. More industries outside of tech are hiring mobile app developers, data scientists and web developers today, including finance, government, health care, consulting and many other fields. Every industry with digitized data, a mobile app or a significant web presence is struggling to fill tech-style positions today.

One cloud hanging over the heads of many grads today is the high cost of education in the form of significant student loan debt—according to a recent analysis, 2016 graduates will owe about $37,000 on average. However, with more jobs available to young workers than in recent years, new grads have better chances of securing those jobs and earning a wage that can help them pay it off. As long as a college degree raises monthly earnings by more than the monthly debt payment, it’s still a worthwhile investment. Also, as part of their benefits packages, some employers like PwC are now offering employees student loan debt reimbursement to alleviate the financial burden.

Finding a First Job

While new grads may not be able to jump directly into a top software engineer or data scientist position, the biggest mistake many young workers make is to wait for the “perfect” job.

Instead, often the best strategy is to get a foot in the door with an internship or lower-level role first. Once inside the “internal labor market” of a company, young workers are in a better position to prove their skills and network into a higher-level position—something not possible from the outside looking in. A surprisingly common career path for young workers is to begin with a position well below their skill level, moving into a better-fitting role once hired.

The single biggest advantage recent college grads have in the job market is geographic mobility. Not having real estate investments or family ties means it is possible to move their skills around the globe into the best-fitting, and highest paying, role available. The ideal strategy for young grads looking for work is to search broadly—not just in their home city or state. Glassdoor’s recently released Best Cities for Jobs showcases cities with some of the tightest labor markets in the country, where employees are highly satisfied with their jobs and work-life balance.

With growing online information on pay, company culture and job openings from resources like Glassdoor, new grads today enjoy better labor market information than at any time in history. That’s one compelling reason to be optimistic about the career prospects facing the Class of 2016.

To speak with Dr. Andrew Chamberlain about this month’s jobs report or labor market trends, contact pr [at] glassdoor [dot] com. For the latest economics and labor market updates, subscribe to email alerts here and follow @adchamberlain.