How Has COVID-19 Changed the Job Outcomes for Recent Graduates?

March 1, 2021

This is the third in a series of memos that we wrote to sharpen our perspective on COVID-19’s impacts on the U.S. labor market and begin to define the implications for Braven’s programming and support of Fellows. Click here for our first post on learnings about the job market from past recessions and second post on impacts on higher education enrollment and persistence.

Executive Summary

A common narrative is that without COVID-19, the class of 2020 graduates would have entered the best job market in years. The objective of this memo is to take a deeper look at the data behind this perspective and connect the pandemic’s effect on recent college graduates’ job prospects with a more complex story of their prospects even before COVID-19.

Our findings:

Recent graduates’ employment never fully recovered from 2008-2009 and have have been more acutely affected than the overall labor market in this recession. Furthermore, the timing of the pandemic has made it difficult for recent graduates to use alternative paths (e.g., graduate school) as coping strategies (18).
Employers expect modest economic recovery in 2021 and plan to maintain hiring at 2020 levels. However, employers initially projected to maintain hiring for the class of 2009, but as the economy continued to worsen, ended up reducing college hiring by 22% (40).
Starting a new job in a remote environment puts recent graduates at a disadvantage for their professional development.

Pre-COVID-19 Labor Market Context

At the start of the pandemic, many headlines read something like , “US college grad hiring forecast shifted from what was supposed to be the best market in 50 years to the worst since the 2008 recession” (1). However, this isn’t an entirely accurate representation of the labor market for recent college graduates heading into the pandemic.

Research by the Federal Reserve Bank of New York showed concerning trends for recent college graduates by comparing unemployment and underemployment outcomes by 4 worker groups:

All workers (aged 16-65)
Young workers (22-27-year-olds without a college degree)
Recent graduates (22-27-year-olds with a college degree)
College graduates (22-65-year-olds with a college degree).

Even a decade after the Great Recession, the unemployment rate of recent college graduates was higher than both the early 2000s and pre-Great Recession levels in 2006-2007.

Federal Reserve Bank of NY. “The Labor Market for Recent College Graduates.” 2020.

The Economic Policy Institute compared 2000 and 2019 unemployment rates for recent college graduates aged 21-24 without an advanced degree. Unemployment was higher in 2019 than in 2010 for all races, ranging from 0.2 p.p. higher for white graduates to 1.8 p.p. higher for Asian American and Pacific Islander recent graduates (3).

Economic Policy Institute. “Class of 2019: College Edition.” May 14, 2019.

Furthermore, while underemployment rates for recent college graduates were on a downward trend through the end of 2019, they were still higher than in the early 2000s. ~40% of recent graduates were in a job that did not require their degree (2).

Federal Reserve Bank of NY. “The Labor Market for Recent College Graduates.” 2020.

This trend is important given the long-term effects of underemployment. Research by Burning Glass and Strada Institute shows that those who are initially underemployed after graduation are 5x more likely to be underemployed after 5 years than those who were not initially underemployed. After 10 years, 75% of those still underemployed at the five-year mark remain underemployed (4). Almost half of women graduates are underemployed compared to 37% of men, a contributor to the gender divide in the workforce (4).

In terms of median earnings, recent graduates’ wages did not increase from 2000 to 2019 after adjusting for inflation. Furthermore, earnings inequality has grown as shown in the growing gap between the 25th and 75th percentiles. Today’s bottom quarter of recent graduates make less (at $32,000) than 2000s graduates (at $32,664) (2,6).

Federal Reserve Bank of NY. “The Labor Market for Recent College Graduates.” 2020.

However, there were some positive factors working for recent college graduates. Pre-COVID-19, 10-year job protections showed jobs requiring a college degree or higher would grow twice as fast as jobs requiring only a high school degree (6). Furthermore, jobs requiring college degrees are more protected from automation; 62% of workers with only a high school degree work in jobs susceptible to automation compared to 28% of workers with a bachelor’s degree (6).

COVID-19 Impact on the Labor Market

First, it is important to recognize that the recent graduate market does not necessarily resemble the job market at large as recent college graduates cluster into certain types of roles. The “recent grad index” calculates the share of recent graduates in an occupation divided by the share of all workers in an occupation. As expected, recent graduates are clustered in entry-level roles like “news analysis” and “financial analysts” (6).

Harvard Business Review. “What the Job Market Looks Like for Today’s College Graduates.” May 9, 2019.

Overall Labor Market

At the start of the pandemic 22M jobs were lost; six months later there was still an 11.5M jobs deficit (8).

In July 2020, the NY Fed surveyed workers who were employed 4 months prior to evaluate the impact of the pandemic. 10.5% of respondents had transitioned into unemployment compared to 2.8% of respondents the previous year. The groups were most likely to have become unemployed were: 45 years and older, held less than a college degree, women, and earned less than $60K/year (9).

Unemployment – as measured by the Economic Policy Institute – also varied by race with Black and Hispanic workers seeing the highest rates of unemployment (9.2% and 8.6% in January 2021 respectively compared to 5.7% for white workers and 6.6% for Asian workers). Furthermore, Black workers have seen the lowest rates of unemployment recovery and maintain the largest gap relative to overall unemployment (8).

While overall unemployment rates are recovering (6.3% in January compared to 14.7% in April), the rate of job growth has mostly stalled. U.S. employers added only 49,000 jobs in January 2021 compared to 4.8 million in June 2020. The Economic Policy Institute notes that “with this kind of slowing in job growth, it will take years to return to the pre-pandemic labor market” (8).

That said, higher-wage jobs have almost entirely recovered; the slow recovery is isolated to medium and low-wage jobs. While high wage employment (earning more than $60k/year) is 0.5% below where it was in January 2020, middle and low wage employment are 6.7% and 27.6% lower respectively (11).

Opportunity Insights Economic Tracker. “Percent Change in Employment.” 2021

While high wage employment is leading the recovery, year-over-year growth in high wage job postings lags low and middle-income job postings. This implies that high-wage workers already in the labor market have mostly recovered, but new higher-wage opportunities are slowing. In December 2020, high-wage job postings were 14% below 2019 postings versus 8% for lower-wage occupations (12).

Indeed Hiring Lab. “Coronavirus and US Jobs Postings Through December 4.” August 2020.

We have identified two hypotheses for why high-wage postings have recovered more slowly. First, lower-wage industries (e.g., retail, food service) adjust their workforces in real-time to demand changes. Higher-wage industries (e.g., tech, finance) plan headcount on a quarterly or yearly basis and are slower to respond to changes in demand (12). Second, higher-wage industries may be fundamentally rethinking their model and speed of workforce automation (13, 14).

Recent Graduate Labor Market

While COVID-19 negatively impacted the overall labor market, recent college graduates were hit especially hard.

Many about-to-be-graduates immediately saw job offers rescinded. A July 2020 survey by NACE found that 7.8% of employers had revoked (or planned to revoke) job offers to the class of 2020. (For context, employers revoking job offers during the Great Recession peaked at 9.5%) (17). For those graduates who did not have offers rescinded, many had job starts significantly delayed. In the same NACE July 2020 survey, 31% of responding employers reported delaying start dates (17).

The timing of the pandemic made recovery from job changes especially difficult. Financial, consulting, and accounting firms conduct on-campus hiring in the fall, so roles with those firms were already closed. Spring recruiting is typically for roles in education, public relations, and creative industries that were greatly impacted by the effects of COVID-19 (18). Finally, because COVID-19 hit in the late spring, graduate school application cycles had ended, making it hard for the class of 2020 to seek shelter in additional education (18).

Those who were left to recruit in the spring, summer, and fall of 2020 have faced a very challenging market. Kim Warne, the former Director of Talent Acquisition at GE, noted that those applying for entry-level positions faced even more competition from individuals with 1-2 years of experience who were laid off due to COVID-19 (22).

Although data on unemployment and underemployment 6 months or a year after 2020 graduation is not yet available, there are a few historical and directional numbers we can use. During the Great Recession, 56% of 2010 graduates held at least one job by spring 2011. Of those who did find work, only 52% said the job required their college degree (24). This would imply a “quality jobs” rate of 27% 12 months after graduation. A UK website – Milkround – provides directional data; they found that as of April (in the UK), 18% of graduates had jobs, compared to a typical 60% at that time of year (21).

The impact of recruiting changes is not isolated to the 2020 graduates but will affect the class of 2021 as well. NACE collected data from 227 employer members to understand the job outlook for the class of 2021. As of September, they found that for the class of 2021, employers expected to maintain hiring at 2020 levels. However, NACE noted that employers initially projected to maintain hiring levels for the class of 2009, but as the economy continued to worsen, ended up reducing college hiring by 22%. Anecdotally, survey respondents told NACE they would not repeat this pattern as reducing college recruiting in 2009 created a disadvantage for their recruiting efforts when the economy did recover (40).

Coping Strategies During COVID-19

As a coping strategy, students have increasingly opened themselves up to the “gig economy”. According to a Handshake survey, only 54% of underclassmen were willing to consider a job in the gig economy pre-COVID-19; now, that number is 69% (23).

Another coping strategy is to flock to technology roles; Glassdoor saw increases in applications for software engineers, data analysts, data scientists, and software developers among recent college graduates (19). The increased interest in technology matches overall labor market trends. Steve Bonomo, a Partner at Arete Partners with 20 years of corporate recruiting experience, noted that candidates with technical degrees would have an advantage in an increasingly digital world (13). Matt Sigelman of Burning Glass has noted that jobs are starting to require more hybridized skills. The skills required for “apple-pie-jobs” (e.g., marketing manager) increasingly require technical skills (e.g., SQL) (14).

Finally, traditional recession coping strategies also apply to the COVID-19 pandemic. Research has shown that while recession graduates were more likely to start at smaller, lower-paying firms, they can catch up by switching jobs more frequently than those who graduated in a stronger economy (34). Kim Warne encourages candidates in a recession to view the first job as “getting a foot in the door” and then finding opportunities to move up (22). Recent graduates can target springboard jobs that offer the opportunity to develop skills and provide opportunities for vertical job switching over time (35).

Impact on COVID-19 on Starting a Job

Braven equips their students not just to find a quality first job, but to have the skills and confidence to succeed in their first job. As a result, it’s important to understand the impact of starting a job remotely for new graduates.

One of the hardest – yet most important – steps in starting a new role is learning the culture of the company. Traditionally, new employees learn the subtle aspects of their new workplaces through everyday interactions with their peers. Hearing conversations and participating in discussions allows new employees to quickly learn the jargon specific to their employer, styles of communication, and what the company values. Without these everyday interactions occurring in the remote environment, new employees will either have a much longer learning curve or will need to manufacture these interactions (e.g., setting up informal interactions with colleagues over Zoom) (31).

A March 23 Glassdoor survey found that only 68% of 18-34-year-olds reported that they were confident in being able to efficiently do their work (32). A July Harvard Business Review survey found that 38% of managers agreed that remote workers usually performed worse than those in office. 29% questioned whether their employees had the required knowledge to do their work remotely and 27% agreed their employees lacked essential skills (33). On the employee side, workers noted the lack of trust and reported high levels of close monitoring. 34% of workers agreed that supervisors “expressed a lack of confidence in their work skills” (33).

Given that early-career interactions are critical for building recent graduates’ workplace confidence, the remote environment provides a challenging starting point.

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