Point J.O.B: Just Over Broke
by Kyle Eggerding
Counterpoint A Dose of Realism
by Sonja Karnovsky and Adam Watkins
The United States economy is currently in a period of stagnant economic growth and, arguably, in an economic recession. This type of period is usually associated with poor hiring rates and a poor job market for graduating seniors. However, 2012 will be much more friendly to graduating seniors than 2011.
The basic economic environment typically drives the decision to hire and to expand businesses. Luckily for graduates, 2012 is projected to have better economic growth than in previous years. According to Morgan Stanley, 2012 GDP growth should average about 2.25%, as compared to the third quarter GDP growth rate of 1.8% as reported by the Bureau of Economic Analysis. This increase in economic growth should provide firms with the confidence necessary to hire a greater amount of graduates.
The Federal Reserve’s annual Beige Report has also painted a positive picture of the economy in 2012. Although the report focuses on the period of November to December 2011, the figures are used as a measurement of economic confidence entering the New Year. For each of the 12 districts that make up the Federal Reserve System moderate economic growth was reported. Even though the growth was only moderate, it is still seen as a sign of greater growth for 2012. The data indicates that the individual consumers, as well as firms, are growing more confident in the direction in which the economy is moving, leading to an improved job market in 2012.
The Federal Reserve has also promised to continue its expansionary monetary policy, meaning it will keep short-term interest rates at their record low levels. These rates will remain between 0-0.25%. By keeping rates so low, the Federal Reserve hopes to increase borrowing and investing that will lead to greater economic expansion. This will give businesses a greater incentive to hire more individuals, broadening opportunities for this year’s graduating seniors.
Unemployment figures for 2011 reveal that the percentage of those unemployed is slowly decreasing. According to the Bureau of Labor Statistics, the unemployment level for December of 2011 was only 8.5%, which is one of its lowest levels since the onset of the recession in 2008. This rate is only expected to continue to decrease as the Fed continues its expansionist monetary policy and the U.S. economy rebuilds its confidence and continues to grow.
Europe’s economic stabilization will also aid the graduates in finding employment. The woes of the Euro and the European Union have had tremendous effects on the United States economy over the past several years. Since financial markets have globalized in recent years and investors have grown more prone to invest internationally, in addition to domestically, international markets now directly affect the U.S. economy. The recent debt crises in Greece and Italy led to massive losses in the U.S. stock market and negatively affected the U.S. economy. However, in the past several months, the European Union has developed comprehensive plans to eliminate Greek and Italian debt, as well as improve the current Eurozone system to mitigate future crises. These measures taken by the EU have led to greater confidence in the ability of not only the European economy to grow, but the U.S. economy as well.
While graduates should be more hopeful for the coming year, these figures are not suggesting that jobs will be in great supply and handed out to graduates such as in the fantastic job market of 2006. The economic growth of the U.S. in 2012 will be moderate, but comparatively better than in 2011. Graduates should be optimistic in finding a job, but they should not remain complacent in their job search.
The key to finding employment in the current market is connections and follow-ups. Graduates need to utilize all of the resources of their university and need to use all of their connections to find employment. Merely applying for a position on a career center website or a firm’s website is still not enough to find employment in 2012. A graduate must be willing to find information on who is specifically recruiting in the office in order to find connections and must be willing to follow-up with the firm and continue to contact them after applying. Some may see this as aggravating, but utilizing contacts and connections, as well as constantly following-up with a firm about a position, shows an employer tenacity, drive, leadership and confidence. These are all qualities that will differentiate one applicant from another.
2012 will by no means have a surplus of jobs for graduates, but all expectations point to a better job market in comparison to previous years. If graduates merely remain driven and willing to go beyond the “Apply Now” option on a website, they will find that 2012 will be a favorable year to find employment.
Every student graduating this year from the University of Michigan undoubtedly knows that jobs are hard to come by. Every student graduating this year has surely poured over applications in a desperate search for scarce jobs. And every student graduating this year certainly knows that the threat of a “double dip” recession looms from problems both domestic and abroad. Congress remains deadlocked over budget issues, and it is doubtful businesses will begin to make major financial decisions until after the election. In Europe, S&P’s credit rating downgrade of nine Eurozone countries last week demonstrates that the Eurozone crisis is far from over. This uncertain economic future is preventing businesses from expanding and hiring new workers, even as economic indicators trend positive in the U.S.
Although the unemployment rate will continue to decline, it will do so slowly, and expectations reveal that the unemployment rate will remain above 7.5% by the time we reach the end of 2012. For graduates just entering the job market, the unemployment figure is even higher. With this in mind, it seems a foregone conclusion that something drastic must be done. Yes, financial figures demonstrate that the economy is slowly improving, but this doesn’t help recent graduates with little work experience in search of their first real job. The scarcity of jobs means that there will be far more applicants per position, making it extremely difficult as graduates attempt to find stable economic footing.
The economic problems facing the entire nation are even more severe in Michigan. The job market for graduates around the country is still bruised from the recession, yet college graduates in the state of Michigan are still leaving in droves to search elsewhere for what scarce employment does exist. Go into any classroom at the University and ask students if they plan on remaining in the state after they graduate, and few would answer in the affirmative. The state’s unemployment rate is higher than the national level, and weak economic situation has caused 50% of college graduates in recent years to leave the state. This “brain drain” has been hampering the state’s recovery as Michigan attempts to restructure its economy. The problem with Michigan’s economy at the moment is a circular conundrum: graduates leave the state because they cannot find jobs, but there are no jobs in the state because the majority of graduates leave. It is irrelevant whether the economy has improved slightly or not: the most relevant measure of economic health is job availability.
Until most graduates are confident that they can go out into the ‘real world’ and find a job, the government must be more proactive with creative solutions to improve both the economy and Michigan’s graduate retention rate. We cannot continue on the same course and expect employment prospects for college graduates to improve as substantially as will be necessary to rebuild a healthy economy.
One proposed solution is a tax credit for graduates of Michigan’s public universities, which would allow them to write-off part of their loan payments. This plan would ease the burden on students and increase the amount of human capitol in the state. Students would pay less in taxes but they would contribute more to the economy overall. Businesses would return to the state as a result of the increase in the resource of valuable college graduates, improving Michigan’s employment rate and economic condition. The state government would also reap benefits from this plan. A similar plan was implemented in Maine in 2008 and will cost $50 million over 10 years, but then is projected to bring the state $30 million in revenues each year after. Clearly, such a plan would be beneficial to Michigan. In the long run, the state would have more people paying taxes, a better-educated work force, and more financial security for graduating students.
Empirically the economy has pulled out of the recession. Factors indicate that production is increasing and consumers are more willing to spend. However, realistic employment rates are lagging behind the positive economic news. Europe’s economy is still in shambles, the United States has barely recovered, and Michigan’s economy has yet to see many positive effects. Recent college graduates still face an uncertain job search and crushing debt unless the government acts with strong fiscal policy, i.e. spending. This fear has resulted in a majority of college graduates leaving in search of employment. This vicious cycle hurts both the state economy and recent graduates. A proposed plan to offer tax credits to relieve part of student debt would help to reverse this problem. Students would be more financially secure, contribute more to the economy, and be more inclined to stay in-state. Through this entire debate one thing is clear: the government must do something to help struggling college students, regardless of what certain statistics may say about the overall state of the economy.
About the Issue
Point author: Kyle Eggerding is a Junior from Cincinnati, Ohio. He will be graduating a year early in April 2012 and is majoring in Econ and Political Science. He hopes to go on to work in consulting, Wall Street, or wealth management fields.
Counterpoint author: Sonja Karnovsky and Adam Watkins are both sophomores at the University of Michigan, and are currently the co-directors for the Roosevelt Institute's Center on Economic Policy.
Edited by: Michael Guisinger and Lauren Opatowski
Cover by: Laura Gillmore