Tuesday, November 11, 2008

It’s a good time to go to college; modern job market requires a BA

The labor market has been contracting for 10 consecutive months, where the payroll survey showed 1.2 million accumulated job loss and the household survey reported a surge in the unemployment rate to 6.5%. There is still momentum left in this contraction. If one loses his/her job, it may be a good time to go back to school for a Bachelor’s degree (BA); the modern job market is focused on workers with at least a BA.

Job creation is focused on higher education

Chart 1 illustrates the seasonally adjusted accumulated job creation by education attainment on a monthly basis from 1992-1999 as reported by the Bureau of Labor Statistics. During the 1990s, there was a surge in jobs created for workers with any post-high school degree, including Associate’s degrees and Bachelor’s degrees (BA). Furthermore, attaining a high school degree was important, as the accumulated job growth was negative for individuals without a high school degree.
Chart 2 illustrates the seasonally adjusted accumulated job creation by education attainment on a monthly basis from 2000 to 2008. The noticeable change is the shift from a surge in job creation for workers with either an Associate’s degree or a Bachelor’s degree to that with a Bachelor’s degree only. Over the last eight years, much of the job growth has been created for workers with a Bachelor’s degree (BA) and above, where there has been a lesser surge in employment for workers with some college education (not a BA) or an associate degree. Furthermore, it appears that employers no longer differentiate between workers with a high school degree and those without a high school degree; accumulated employment has remained unchanged for the two education levels.

In the 2000s, job growth has been focused on those workers who have attained a BA or greater, and to a lesser extent, on those workers with an Associate’s Degree. Getting a college education is extremely important in the modern job market.

The October payroll survey confirms this fact. Service-sector jobs that likely requires a lower level of education have been contracting since at least June 2008 (the first point on this report):
  • Administrative and support services: -59,700
  • Temporary help services: -33,600
  • Accommodation and food services: -19,400

While service-sector jobs that likely require a hire level of education are still seeing growth or the contraction started only recently:

  • Health Care and social assistance: +31,900
  • Private Educational services (just a second monthly decline): -11,200
  • Government educational services: +18,000

On average longer labor contractions last over 13 months

This labor cycle is proving to be a long one. Since 1950, only four previous recessions have produced 10 or more consecutive months of job loss (as reported by the establishment survey), and on average, the longer contractions last 13.3 months. The 1981-1982 and 2001 recessions produced the longest labor contractions: 17 months and 15 months, respectively. This cycle, which is already 10 consecutive months long, is likely to see more job loss – at least 3.3 months according to the average.

People go back to school when the economy is suffering. That is a rational decision for two reasons: (1) there is likely some momentum left under this labor market’s contraction, and (2) attaining a Bachelor’s of Arts degree is essential in the modern job market.

Rebecca Wilder

1 comment:

  1. Welcome back from your mini vacation. Your findings are mirrored by what is happening at one Univ. - Jackie says student numbers are up. It also points to the change from rustbelt jobs of the northeast. People can also "work" the Pell grants for cash and longer unemployment compensation is in the works...
    Happy Veterans Day!!