Sunday, May 8, 2011

A flood of graduates

From the Department of Education's 2010 digest:

During the 2010–11 academic year, postsecondary degrees are projected to number 818,000 associate’s degrees; 1,696,000 bachelor’s degrees; 687,000 master’s degrees; 100,700 first-professional degrees; and 71,700 doctor’s degrees (table 279). Between 1998–99 and 2008–09 (the last year of actual data), the number of degrees conferred rose at all levels. The number of associate’s degrees was 41 percent higher in 2008–09 than in 1998–99, the number of bachelor’s degrees was 33 percent higher, the number of master’s degrees was 49 percent higher, the number of first-professional degrees was 17 percent higher, and the number of doctor’s degrees was 54 percent higher.

Let's run those numbers again:
1.69 million BA's
687k master's
100k professional degrees
2.4 million BA's, MA's and professional degrees will be hitting the streets this month. Of course some BA's will chose to continue their education but from these states the ratio of BA to MA is nearly 3 to 1. So we can safely assume that up to 2.,2.2 million graduates will be hitting the job market this summer. Divide 2.2 million by 12 (months) and that equates to 183,000 jobs per month that the econony needs to create just to place this year's graduates.

And what about high school graduates?

Again from the Dept of Taking Young People's Money:

About 3,252,000 high school students are expected to graduate during the 2010–11 school year (table 110), including about 2,937,000 public school graduates and 315,000 private school graduates.

Of the 3.25 million high school grads at least 52% of them will go to college (using the college graduate numbers). Of course not all college students graduate so lets be safe and bump the percentage up to 65%. 65% of 3.252 million is 2.113 million, the remainder being 1.113 million. This gives us roughly 1.13 million high school grads that will not go to college. So in addition to the graduate numbers we have 1.13 million high school grads divided by 12 (months) equals 94,166 jobs per monthly basis to include the high school grads in the workforce. Ad 94k (high school grads) by 183k (college grads) and the country needs to add 277,000 jobs per month just to keep high school and college grads from being unemployed.

So my back of the napkin numbers show that the country needs to add 277k just to include the new entrants into the work force. Let's not forget the 10 million plus that were laid off or lost their business from the credit implosion.

Now let's take a look at the latest job date from the BLS:

57,000 jobs in retail trade
46,000 jobs in leisure
49,000 jobs in education and health care (bubble jobs soon to pop)
51,000 jobs in professional and business services

These four sectors made up the vast majority of the job growth for a grand total of 203,000 jobs. 50% are either low paying retail/leisure jobs while even the "professional" business services can include jobs for a wall street analyst to a shitlaw lawyer making 25k a year part time. Keep a close watch on the education and health care sector as both of them are overheated waiting for a pop, especially education.

Finally we have the birth/death adjustment, which is the government's guess as to how many jobs were created or destroyed from small businesses. The latest pie in the sky number was 175,000.

So how many "real" jobs did the economy generate last month? No one can truly know but I suspect its less than 100k. In addition, higher paying government jobs are declining month after month so a state employee that was earning 120k per year who now gets a gig working in retail for $12 per hour takes a big chunk out of his earning power.

In conclusion, the country is seeing a flood of graduates entering the workforce every year, with millions of them being levered up to their eyeballs in student loan debt. It is apparent that the organic economy is not generating enough high paying jobs to not only incorporate high school graduates but also the dangerously indebted "educated class." I expect the slow motion train wreck to continue until something gives, when the pressure of debt default reaches a boiling point. Obviously, this situation will not end well at all.



  1. You realize that numbers like this are why I'm a liberal?

    1) Conservatives want to lay off state workers - this isn't going to help overall employment, or the economy. It's just going to hurt services and further depress demand, which in turn will lead to more unemployment.

    2) There is no such thing as a free market. Everyone who is not 12 should know this, but some people insist on pretending. Because people need a government to keep from shooting each other, or otherwise ruining everything they touch, the government is ALWAYS creating winners and losers. The parties switch roles, but right now, conservatives are making winners of people who aren't contributing to job creation, including the banks. And liberals are suggesting fairer systems, overall. Franken and Harkin are suggesting ways to ease the student loan burden on students, while the GOP is fighting tooth and nail to prevent there from being any consumer protections whatsoever.

    So the common sense interpretation of the above - besides "Do not for the love of god take on more debt to join a profession" - is, be a liberal, at least for now.

  2. Hi Liz. If it applies happy mothers day!

    You have posted about you being liberal in the past. I'm assuming by liberal you hold the position that government spending should continue because without it the economy will get even worse? Here are my thoughts on the matter:

    Government can only spend what it recieves in tax revenue. As you are well aware there frankly isn't enough money to support government at its currently bloated level. And besides, government does not create goods/services it takes and regulates from the productive economy. For example, cigarettes have doubled in price, mainly due to taxes. California has some of the highest gas in the nation. Why, taxes of course. Sales taxes have risen in our local areas from 7.75% to over 10%. Why? To fund local government. The water and electric bill continues to rise in LA county while the Dept of Water and Power gave themselves a 8% raise. In effect, the DWP took from business and gave it to themselves. Government perks are a luxury, not a necessity, in my opinion. Without the productive private sector, government cannot exist.

    One more example: My uncle has been trying to open a restaurant in San Bernardino County for the last 2 years. The county wanted $500,000 for a water fee and $600,000 for a traffic impact fee! Thats over $1.1 million in county fees just to open a restaurant!! Fucking outrageous. The restaurant is ready but he has no license to operate and no rights to the water. 2 years later the traffic impact fee has been reduced to 70k and the water fee to 250k. But still the restaurant is closed because he can't get the permits until he greases the county's palms. Think about the 15-20 employees that would have been working for the last 2 yrs. Think about all the suppliers, the marketing expenses, the tv phone and alarm bill. Think about the state taxes that would have been created from this location. And lastly, the underserved community as the area has a severe lack of decent restaurants. This is government at work destroying value. 20 years ago people opened restaurants at ease. Now the red tape is turning business people away with the legal extortion and all the bullshit. This is why I am extremely conservative when it comes to the gov and the economy. Stay the fuck out is my motto.

  3. Hey Subprime-

    One of the things that I wonder about is how people graduating from college/grad school etc are counted or not counted in the workforce. I mean, for BLS, dont they calculate unemployment by looking at UI claims? A new grad cant do that. It's almost as if they dont even exist in the workforce. Kind of like the "discouraged worker" who drops out of the workforce after being unemployed for a year or so.

    Same kind of BS with loan defaults. They don't calculate defaults into the default rate until after two years of graduation.

    What's next? Not counting food and oil prices in inflation?!? Oh wait....

  4. oops meant to say dont count defaults after two years into the rate

  5. I think a blanketed statement that government takes goods and services from the economy is wrong. In the realm of scientific research a lot of basic research is funded by government such as NIH and NSF among others. This research leads to them marketing their products to companies so they can eventually be developed into products. Also, the university I work for provides extension services that enable local businesses to figure out problems they are experiencing and try to fix them and you know what sometimes they don't listen, it also provides new ideas that local businesses can try to implement. Throwing stones at one side and not throwing it at the other is unproductive, both are wrong. I consider myself more liberal, but I personally feel not listening to each side with a grain a salt will be the death of us.

  6. Anon: here is a breakdown of the 2010 federal budget

    Social security: 19.63%
    Defense dept: 18.74%
    Unemployment/welfare: 16.13%
    Medicare: 12.79%
    Medicaid and state health: 8.19%
    Dept of Education: 4.63%
    Dept of Homeland Sec: 2.22%

    These seven areas alone take up over 82% of the federal budget. In addition, a substantial amount of the war spending is off balance sheet supplement spending so defense spending is closer to 900 billion, or 23%. Any politican that attempts to cut into any of these programs will be met with outright hostility.

    Take a look for yourself.

    Dan: lies, damned lies and statistics. I'll tell you this, when I was looking for work for over a year how the hell did the government know that I was looking for work? The didn't! They just pick out a number that makes U3 look good for the papers.

  7. Anon: I didnt get to my point so I'll finish here.

    Government control over the economy causes more harm than good. True there are some examples where government can help living standards, innovation and the general standard of living. But consider the NEGATIVE aspects of government. Look at the housing market fiasco as a prime example. Fannie Mae and Freddie Mac, coupled with the federal reserve and it policy of low interest rates coupled with a greedy wall street created a monster which continues to ravage the middle class to this day. Another example is the tuition bubble which is also a child of government. Federally backed student loans are the primary cause for the explosion of tuition. Do you need more proof that government intervention in the end causes more harm than good? I certaintly don't.

    With regards to the entitlement programs, in the short run people will say that its good and that we need to help the poor and elderly. The reality is that we are not helping anyone because these welfare programs have a expiration date on them. Eventually the money will run out and "severe cuts" will be introduced. People need to be self sufficient and independent, not dependent on tax payers and the legacy credit score of a once great and wealty nation.

    And before people jump on me for bashing the entitlement programs, lets just say that I give more than enough food to the poor. So long as its MY CHOICE to give away a portion of my pay and not some bureaucrats that are apportioning my tax dollars for one purpose but then siphoning it off to some crooked defense firm that bills the tax payer 20k for a toaster.

  8. 1) I agree with you about government revenue. However, I think this clearly leads to the conclusion that tax rates should return to the levels used during the Clinton presidency.

    2) Last month's jobs report was absolutely typical for about the duration of the Clinton presidency.

    3) I am just not a person who cares that much about theory. If you tell me you have a wonderful reason why the government should not be involved in our lives, and then I turn on my faucet and the water is green because the government is not involved, I will be pissed. And I do not WANT to buy my own water. It's stupid and inefficient and leaves my poorer neighbors subject to drinking awful water. I don't want to live in filth. So screw conservative philosophy, for me. Nothing you can say about theory will convince me that we have to live with dirty water.

  9. PS - the housing market fiasco was caused by lack of regulation, which allowed the banks to make loans they should have known better than to make, and to profit from those loans by selling the loans as AAA secured when, in fact, the loans were junk.

    That's why the housing crash caused a market crash. The government wasn't even in the subprime market until about 2005, when the bubble was pretty well inflated. And government incentives CERTAINLY were not required to create the subprime securities market, which is where the real money was.

    The idea that small number of homeowners could crash the $15 trillion American economy is ridiculous, on its face, but somehow a lot of free market enthusiasts think it's possible that government magically corrupted free market mechanisms, and this in turn led the system to crash? What is it you think markets are doing, exactly?

    Just the loan numbers alone should tell anyone who's paying attention that theory is silly.

  10. Liz, the housing market was not caused by a lack of regulations, but too much regulation. These mortgage loans backed by Fannie Mae and Freddie Mac were FDIC insured, meaning taxpayer guaranteed, which allowed these investment banks to take extremely high risks. There is no evidence that the few combined commercial and investment banks that were created after the repeal of Glass Steagall were more heavily involved in the credit boom than others. Indeed, the companies most involved include mortgage companies Fannie Mae and Freddie Mac, insurance company AIG and pure investment banks Bear Stearns, Lehman Brothers and Merrill Lynch, none of whom were affected by the repeal of Glass Steagall.

    The root cause is the federal reserve and FDIC-backed loans. Where was the SEC in the midst of all of this? Aren't they the regulation you speak of? The federal reserve and the SEC have too much power; they have failed miserably and yet you want to give them more power?

    You talk like every other brainwashed liberal I've met during my few years at Berkeley. Maybe one day you will realize the truth, maybe you won't. Either way, the wealthy oligarchs love you because you're completely distracted and diverted from the real problems. But hey! Obama will save us all since he was elected in 2008! Oh wait...

    -Haigui Biopreneur

  11. The housing market was not caused by too much regulation. It was caused by the SEC and the Federal Reserve refusing to pop a known bubble, because the experts assumed we could always clean up after an asset depreciation, when in fact we can't, given our poltiical system.

    That was the extent of their involvement - they didn't pop it. It is ridiculous to try to argue otherwise, and you seem to be taking the whole "the fed just sort of interfered and caused bad things" on faith. Explain how, exactly, the Fed caused banks to sell bad loans labeled as good loans? That was private actors, making a fortune playing the system, because our regulatory system was underfunded and there essentially was no oversight. There simply WAS no problem of excessive regulation causing banks to make money cheating each other. It's insane to suggest that caused the bubble or the crash.

    And I am not actually a brain-washed liberal. I grew up with neighbors who had a lot of guns, and government has always seemed like the less scary of two available options for settling disputes and damages. It's completely practical, and has nothing to do with theory.

  12. Why does everyone keep saying the SEC? The SEC doesn't regulate banks -- it's the OCC or OTS.

  13. Subprime, that story about your uncle is a disgrace.

    However, the take-away for me is that there is actually a place called San Bernadino. Down here in Aust it's the name of the cheapest rotgut wine that committed alcoholics eventually bottom out on - the last rung before Listerine. My own uncle drank it by the litre till he was eventually called home that flophouse in the sky. All of which is completely off topic, other

    Still, there is a symmetry - for both our kin, San Bernadino = doom.

  14. I just want to preface my post by saying I am neither democrat/republican/liberal/conservative/right/left.

    As Haigui Biopreneur noted, these labels are nothing more than a divide and conquer tactic used by the higher powers to distract the sheeples from the main societal issue of the big government/ big corporation mercantile conglomerate.

    Having said that, Liz is a prime example of an individual who relies on knee jerk, emotionally induced decisions in lieu of facts backed up by universally accepted econometric data. Sorry, but your ideologies have EVERYTHING to do with theory and almost NOTHING to do with pragmatic solution. A few snippets for you:

    1. Why do people continue to say "deregulation" as a source of the financial collapse? I thought to 'deregulate', you have to take out regulations and safe guards that once existed to curb problems that once existed. This is not so in this case as there were never laws that specifically say "no derivatives/ swaps/etc". Instead, during the end of his term, Clinton (which you so covet) signed a bill that legalized credit default swap, thereby opening the flood gates to the monstrosity that we have today.

    2. While the Feds didn't force banks to give out predatory loans, the government did create the Community Reinvestment Act (CRA). Rather than allowing banks to say no to people with shaky credit scores of balances, some banks were forced to give loans to "disadvantaged minorities" or face the prospect of ethnic discrimination based lawsuits.

    Key points one and two are just samples of the FACTS Subprime and Haigui have already mentioned as being elements of government intervention in the free markets which create egregious consequences.

    3. Your assertion of the SEC and the Fed's failure to regulate things really doesn't help your position. It just shows government as being inherently and blatantly inept. Yet, you want them to play a bigger role and spread more of their incompetence. Splendid.

    4. You have quite a habit of reaching and grasping for straws. Let me get this straight. Limited government regulation => Contaminated water. Meanwhile owning a gun => an anti-liberal neighborhood. Ok, now.

    5. Are you really one of those people who want more government and more regulation in the business world? Last time I checked, companies in America already pay over $1 Trillion a year for regulation compliance services (10K audits, SOX, etc.). Yes. ONE. FUCKING. TRILLION. Making the cost of doing business more pricey in America isn't exactly going to help an already screwed up economy and will simply drive more jobs overseas.

    If you want a real pragmatist, listen to Subprime.

    - CTownRay

  15. @Subprime

    Props to your uncle for trying to pursue business endeavor in an extremely unfriendly business state (California). I also have an uncle in the food business and I know how challenging it can be. I hope things go well in the end.

    I find it interesting you mentioned the San Berd area of Southern California as the location of your case study. One of my good friends from high school who attended UC Riverside once worked as a bank teller in that area and often saw a good number of welfare recipients.

    Despite working 30 hours a week to try to pay for food, rent, and school, he often saw charity cases that bought in higher welfare check amounts than the ones he was getting from his bank employer.

    Now, I know being a bank teller isn't the most illustrious job in the world, but something is EXTREMELY wrong when 30 hours worked << 0 hours worked.

    Just goes to show what happens when government tries to milk the golden goose (like your uncle) as much as possible only to reallocate the funding to free loaders.

    Then again... people like Liz will probably think it isn't enough and the government should continue to take more or run the risk of having green water :).

  16. Liberals like Liz would point out that higher wages for people like your cousin would also fix the inequity, while providing more benefits to the area and the tax base. Henry Ford wasn't exactly a liberal, but he raised wages for his workers so they could afford his cars. It's an extremely effective way to increase demand in a consumer-based economy, and 70% of our GDP comes from consumers right now.

  17. Liz seems to be living in false revisionist history. Henry Ford didn't raise wages out of the bottom of his kind heart. He raised wages because the company was experiencing extremely high turnover rates while making record high profits at the same time. It's no different in China right now. Blue collar workers are experiencing an upward of 50% wage increases in the past few years. Minimum wages have been increased out of the manufacturers' own will. Why? Because they really have no choice.

    Oh, and as for the housing market, Liz. You blame federal reserve for not popping the bubble when it is main culprit for creating the bubble in the first place? What kind of a screwed up logic is that?

    Liz, you asked, "Explain how, exactly, the Fed caused banks to sell bad loans labeled as good loans?"

    --- It's really simple. Please pay attention because I will not explain it again. These loans are FDIC insured. When the federal reserve lowers the prime rate from 6.5% to 1.75% in just merely one year, it is promoting these banks to make ridiculously "bad loans". You certainly didn't think of these loans as "bad loans" back then. In fact, liberals like you were pushing for "affordable housing" from 2002 to 2004, remember? This bad loans would have never been possible if the federal reserve did not irresponsible manipulate monetary policies.

    Again, what are the regulations you speak of? The only deregulation that happened was Glass-Steagall, and I have already provided a strong argument backed up with data (if you want it) that it had nothing to do with the housing bubble. Please try a real argument rather than spouting the typical leftist party line.

    - Haigui Biopreneur

  18. Liberals like Liz also think businesses are just overflowing with milk and honey (cash). Oh, these companies aren't going out of business! If only these greedy business owners would just "give up the bucks" to the politicians, union leaders and senior members, we would be singing kumbaya in paradise!

    Hey Liz, ever heard of GM? They "gave up the bucks", and went bankrupt.

    - Haigui Biopreneur, international entrepreneur who provides a few jobs to Americans & Mexicans, and a much more productive member of society than "Give me your tax dollars" Liz.

  19. "I don't want a nation of thinkers. I want a nation of workers."

    John D. Rockefeller

    PS: John D Rockefeller is a piece of shit. F**k John D Rockefeller.


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