Posts Tagged ‘Incomes’

Recent College Grads Can Expect Starting Salaries 10 Percent Below 2000 Levels

Tuesday, November 8th, 2011

Recent college graduates can expect to earn 10 percent less than they did as long ago as 2000.  In fact, one of the longest-lasting legacies of the great recession may be its negative impact on the lifetime careers of young graduates.  The current high unemployment rate will leave many of them a step behind throughout their careers.  A study conducted by Yale School of Management economist Lisa Kahn determined that workers who graduated from college during the recession of the early 1980s were still in worse shape financially than workers who graduated in better times after approximately 2006.  When young college graduates do get a job, it frequently won’t pay well.  According to Census Bureau statistics, the median annual earnings of a worker 25 to 34 years old with a bachelor’s degree was $40,875 last year, a significant decline from the $45,200 reported in 2000, adjusting for inflation.

Despite the dismal salary news, there is good news in that fact that hiring for 2011 graduates is up 10 percent when compared with last year.  Meanwhile, unemployment rates among those with a degree is less than half the national average.  It’s those with just a high school education whose unemployment rates are above the national average.

The typical wage for recent college graduates has fallen by nearly $1 per hour over the last 10 years, according to the Economic Policy Institute (EPI).  Despite the lack of growth in entry-level wages, a college degree remains a worthy investment.  According to the EPI’s Heidi Shierholz, “After gains in the 1980s and particularly in the 1990s, hourly wages for young college-educated men in 2000 were $22.75, but that dropped by almost a full dollar to $21.77 by 2010.  For young college-educated women, hourly wages fell from $19.38 to $18.43 over the same period.  Now, with unemployment expected to remain above 8 percent well into 2014, it will likely be many years before young college graduates — or any workers — see substantial wage growth.”

There is some upbeat news for the class of 2011. Students who will graduated this year received job offers with starting salaries averaging $50,034 annually, a 3.5 percent increase over last year, according to a survey from the National Association of Colleges and Employers (NACE).  Employers said they plan to increase hiring of college graduates by 13.5 percent compared with 2010.  Business majors were the best positioned, with the average starting salary rising nearly two percent to $48,089.  Accounting majors received salary offers of $49,022, up 2.2 percent, while finance majors were offered an average of $50,535, an increase of 1.9 percent.  Starting salaries for business administration/management graduates fell slightly to $44,171, down 2.3 percent.  Engineering graduates — typically one of the highest-paying fields — didn’t see a big change, with the average starting salary down 0.3 percent but still impressive at $59,435.

Certain engineering majors saw noteworthy increases, with electrical engineering majors receiving an average salary offer of $61,690 — up 4.4 percent over 2010.  Mechanical engineering salaries rose 3.8 percent to $60,598, although it didn’t pay as well to graduate with a degree in civil engineering, with starting salaries in that field slipping 7.1 percent to $48,885.  While the association’s survey didn’t break out starting salaries for individual liberal arts majors, offers were up an impressive 9.5 percent to $35,633.  That compares to a steep decline of 11 percent last year.

The financial crisis is forcing Americans to re-think what they want out of a college education. “Students and families are becoming more savvy consumers about how they get their degrees, where they go to school and how they pay for it.  I think that is long overdue,” said Edie Irons, the Institute for College Access and Success’s communications director.  “It used to be that a college degree seemed like a ticket to ride, but there are no guarantees anymore that once you get that degree, you’re going to get a great job and do really well financially.  There’s been research that has shown students graduating in a recession earn lower incomes throughout their lifetimes than those graduating in a boom,” Irons said.  “It is a real concern, and we think graduates need good information about how to manage their debt.”

According to Brandon Lagana, director of admissions at Northern Illinois University, students are being more fluid in their approach to college.  Some chose a more affordable university, others start at a two-year institution then finish at a four-year school, and some wait a few years before starting any schooling.  “We’re certainly seeing students using more options to a degree than they ever did before,” he said.

Read my recent Huffington Post article about college education and debt here.

Economy Reaches Stall Speed

Tuesday, August 23rd, 2011

The American economy expanded at a snail’s pace of just 1.3 percent in the 2nd quarter, according to a report from the Department of Commerce. Growth in the first three months of 2011 was reduced to 0.4 percent from an earlier reading of 1.9 percent.

“Today’s first look at GDP in the 2nd quarter confirms what we already knew:  The economy isn’t growing as fast as it needs to,” said Commerce Secretary Gary Locke.  “Experts have repeatedly warned that if this uncertainty continues, our economy will pay the price.  We can’t afford to return to the same failed policies that brought us here.  We must build on the progress we’ve made over the last two years and reach a balanced compromise that will reduce our debt and at the same time strengthen our job-creating ability and global competitiveness for the future.”

Soaring gas prices and meager income gains caused consumers to limit their spending in the spring.  The abrupt slowdown means the economy in 2011 will likely grow at a slower pace than in 2010.  Additionally, economists don’t expect growth to pick up enough in the 2nd half to cut the unemployment rate, which rose to 9.2 percent In June.  Economists originally thought that a Social Security payroll tax cut would spur adequate growth to reduce the unemployment rate.  Unfortunately, the lion’s share of that money was spent filling up gas tanks as gas prices soared.  In an unfortunate twist, employers pulled back on hiring because Americans spent less.  Thanks in part to high gas prices, consumer spending was virtually flat throughout the spring.  It grew a mere 0.1 percent, after experiencing 2.1 percent growth in the winter.  Spending on long-lasting manufactured goods — primarily autos and appliances — declined 4.4 percent.

Usually reliable government spending fell for the 3rd consecutive quarter.  State and local governments also slashed spending, the seventh time in eight quarters since the recession officially came to an end.  Corporate spending on equipment and software grew 5.7 percent in the 2nd quarter, down from the 1st quarter’s impressive 8.7 percent pace and below 2010’s double-digit gains.  Additionally, American incomes are not growing.  After-tax incomes, adjusted for inflation, rose just 0.7 percent, similar to the 1st quarter and the weakest numbers since the recession ended.

Kathy Bostjancic, director for macroeconomic analysis at the Conference Board, said the poor new data could push the American economy back into recession.  Although she said that the chances of that are still low. “Anemic consumption, still declining state and local government spending, tepid business investment, and soft housing activity all combined to offset some strength in exports,” she said.  “Concerns about the weak labor market and rising food and energy prices continue to weigh on consumer confidence.”  In June, the Federal Reserve cut its estimate of economic growth for the year.  The Fed now thinks that the economy will grow between 2.7 percent and 2.9 percent, down from an April estimate of 3.1 percent to 3.3 percent.

The economy is struggling to recover from the recession that lasted from 2007 to 2009, a time when the GDP contracted.  According to a government report, the recession was even worse than originally estimated.  Between the last few months of 2007 and the middle of 2009, the economy declined by 5.1 percent.  That is one percentage point more than previous estimates.

Writing in the Washington Post’s “Political Economy” column, Neil Irwin says that “But even if the number comes in somewhat higher than economists are expecting, it will be no cause for celebration.  The U.S. economy is capable of growing at about 2.5 percent a year over the longer term, as the population increases and workers become more productive.  But when the economy grows at that rate, the labor market can only tread water — accommodating the rise in the labor force, but unable to put the millions of Americans still unemployed back to work.  So, what happens to employment when the nation’s economic growth stays below that 2.5 percent rate, as it has in the 1st half of this year?  The U.S. jobless rate has risen for three months straight.  Among the major culprits in keeping job seekers out of work are the financial struggles faced by state and local governments that are cutting tens of thousands of jobs and billions of dollars in spending each month to balance their budgets.  State and local government cutbacks subtracted 1.2 percentage points from 1st quarter GDP, the Commerce Department has estimated.  Friday’s GDP release shows the amount of drag in the 2nd quarter.  States were able to delay those cutbacks when they received hundreds of billions of dollars from the federal government in 2009 to ride out the recession.  That money has all been spent, and now states are being forced to slash spending and raise taxes to comply with balanced-budget requirements.  Congress has given little serious consideration to reviving the stimulus program.”

Some economists see the light at the end of the tunnel.  “The pace of fiscal retrenchment is likely to pick up in coming years,” said Jan Hatzius, Goldman Sachs’ chief economist, “and this year’s experience confirms our view that this adjustment is likely to weigh on GDP growth.”

November Unemployment Matches 1980s Record

Wednesday, December 22nd, 2010

November Unemployment Matches 1980s RecordWith the U.S. unemployment rate rising to 9.8 percent in November,  the Department of Labor is concerned that economic recovery isn’t progressing as quickly as it would prefer.  For the 19th consecutive month, unemployment has stayed above nine percent — the longest streak on record, beating out previous highs in the 1980s.   Despite optimistic predictions that the nation would add 150,000 jobs in November, just 39,000 new jobs were added during the month, bringing unemployment up from 9.6 percent to 9.8 percent.

The Federal Reserve has decided to stay the course, saying the “economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment.”   Worries about steady high unemployment were the main motivation behind the Fed’s decision to launch a second round of economic stimulus in November with a new bond-buying program.  Progress on reducing unemployment has been “disappointingly slow,” according to the Fed.

The persistent level of high unemployment shows that many Americans are still suffering, even though the National Bureau of Economic Research says the recession officially ended in June 2009.   The economy lost more than eight million jobs during the recession.  “To anyone around the dinner table, it means little,” says Lawrence Mishel, president of the liberal Economic Policy Institute.  “The fact is, unemployment is going to remain flat for a year.”

“With the jobless rate stuck at 9.8 percent, the economy needs all the help it can get,” said Sung Won Sohn, economist at California State University.  Because nearly 40 percent of the unemployed have been jobless for more than six months, there is growing fear that the cause may be more profound than the deepest recession in more than 70 years.