The following article is an opinion piece By Dr. Robert E. Pritchard, Professor of Finance, Rohrer College of Business, Rowan University
At Rowan University, we will be graduating some 2,000 students this spring. Thousands of our graduates’ friends and relatives will attend commencement to celebrate what should be a very happy day. Unfortunately, however, this year throughout the country many graduates will not be very happy. With few employers hiring, many graduates will be unable to secure positions.
The job market is very tight and shows little sign of any near-term improvement. Unemployment remains at a high 9.7%. Adding discouraged workers and those working part time because full-time positions are not available totals about 18% either unemployed or underemployed.
Many economists expect unemployment to remain above 8% for at least the next two years – probably even longer now that the Patient Protection and Affordable Care Act has been signed into law.
More Basement Boys and GirlsTragically, many college graduates will not be able to find professional employment for months or years after graduation. Ultimately, some will become “Basement Boys or Girls” – young adults forced to live with their parents for extended periods because they cannot secure good jobs.
In a February 2010 article, The Pew Research Center (pewresearch.org) indicated that, “fully 37% of 18- to 29-year-olds are unemployed or out of the workforce, the highest share among this age group in more than three decades.” On March 18, 2010, the Pew Research Center further reported that “about one in five adults ages 25 to 34 now live in a multi-generational household.”
Edwin Koc, director of Strategy and Foundation Research at The National Association of Colleges and Employers (NACE) provides specific information on the impact the recession is having on college graduates. Each year, at the end of April, NACE surveys students who will receive undergraduate degrees that spring. To provide a measure of the impact the recession and high unemployment have had on graduating students, consider first NACE’s data for 2007 (prerecession).
The April 2007 survey indicated that 64% of the spring graduating class had started looking for a job and 50.2 % had applied for jobs. Of the 50.2%, 51% had already secured positions. That is, about 26% of the 2007 graduating class had secured a position by late April. Another 20% planned to attend graduate school. The remaining students either 1) planned to look for a position in the near future, 2) planned to take some time (perhaps vacation) before starting to look for a position, and/or 3) start their own businesses.
The April 2009 survey showed major negative changes. It revealed that although 59% of the spring graduating class had started looking for jobs, only 42.2% had applied for jobs. Of the 42.2%, only 19.7% had secured a position. That is, only about 8.3% of the 2009 graduating class had secured positions (a decrease of about 68% versus 2007). Finally, a significantly greater 26% of the 2009 class planned to attend graduate school. The remaining planned to look for a position, etc.
Obviously, most newly minted college graduates are facing a rough road. On the brighter side, Koc indicated that preliminary information for 2010 appeared to be slightly more positive. Nonetheless, the job market will remain very tight for some years ahead.
During the last year the government largely ignored the recession and the painfully high unemployment. President Obama promised that quick passage of The American Recovery and Reinvestment Act of 2009 (passed February 2009) would keep unemployment below 8%. He failed to keep his promise. Now, there are few opportunities for millions of unemployed college graduates as well as millions of others who want to work.
The President Must Take a Strong Leadership RolePresident Obama could take a strong leadership role to quickly increase employment – and at minimal cost. Significant improvements could be garnered simply by reducing the existing uncertainty and fear. I believe he owes that to the nation’s graduating class. I recommend the following actions:
First, extend (or, preferably, increase) the Bush tax cuts on long-term capital gains (that expire at the end of 2010) for at least another three years. This will reduce a lot of uncertainty within the investment community and set the stage for increases in stock values. Increases in stock values will increase 401(k) type plan values for millions of Americans. The wealth effect will kick in and consumer expenditures will increase. This will stimulate the economy – including the value of housing. Finally, tax revenues will increase, not decrease, from the rate reduction or stabilization.
Second, stop bashing business – and especially banks. Bashing business makes for great sound bites and politics but it is scary for everyone and really impedes economic growth.
Third, put Cap and Trade on the back burner. We simply cannot afford additional environmental programs and especially one like Cap and Trade that will result in significantly higher costs of gasoline, electricity and other fuels. Increasing the price of gasoline, heating oil and electricity are equivalent to imposing a highly regressive sales tax. Jobs will be lost and tax revenues will decrease if Cap and Trade is passed.
Fourth, instead of spending more money on worthless pork, target one or two specific areas for long-term economic growth investment. Consider FDR’s infrastructure programs: the Hoover Dam, the Tennessee Valley Authority and many other public works projects; Eisenhower: The Interstate Highway System. Such infrastructure projects resulted in long-term economic growth producing many millions of jobs and spurring continuing growth for decades.
Where should the government focus its primary attention now? My recommendation is natural gas. New drilling techniques have the potential to make America the world’s leading producer of natural gas and return us to an energy-exporting country. Yes, you read correctly – an energy-exporting country! Furthermore, unlike solar and wind-generated energy that require huge government subsidies to be competitive, natural gas exploration and extraction do not. In fact, increasing the output and sale of natural gas will 1) produce billions in badly needed tax revenues, 2) spur job creation, 3) place downward pressure on our use and the cost of oil, 4) help control the runaway Federal deficit and 5) help reduce our trade deficit.
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