CHART OF THE DAY: The College Bubble Has Popped

With the cost of tuition exploding higher, student loan delinquency rates on the rise, and wages for college grads going nowhere, young people are increasingly asking themselves if higher education is really worth it.

While it’s true that the unemployment rate is lower for the those with college degrees, data shows that labour market conditions are rapidly deteriorating for this demographic.

Yesterday, we reported on a new eye-opening report from Goldman Sachs’ Jan Hatzius who noted that the labour force participation rate for college-grads was tumbling.  This has been giving the appearence that the unemployment rate has been relatively stable.

Hatzius took the employment rate as a percentage of the population for college grads and then for those with less than a high school diploma.  This provided a picture of the employment rate without having to address the changes in labour force participation rate.

“The statement that college graduates are the only group to have seen employment gains also requires qualification,” said Hatzius. “It is technically correct, but nevertheless misleading. As shown in Exhibit 3, the employment/population ratio has fallen just as sharply among college graduates as among high school dropouts since 2007; in other words, the growth in the absolute number of employed college graduates has been nowhere near enough to offset the increase in the size of the college-educated population.”

While Hatzius is mainly concerned with trends since 2007, the chart he provided goes farther back.

As you can see since the early 1990’s, the employment rate for college graduates has been tumbling while the employment rate for those with less than a high school diploma has trended higher.

“The college bubble has popped,” tweeted CNBC’s John Carney in response to Hatzius’ report.

Goldman Sachs

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