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October 8, 2022

Jacqui Barrett

October 2022 Early Talent Labor Market Updates

Tight labor market showing signs of slowing. What is the job market like for young talent?

Key takeaways

  1. Data show that the labor market has been tougher than average for students and grads in the last few years, and that some employers are beginning to pull back on job opportunities—that said, unemployment rates for this and all demographics are still very close to historical low.
  2. Job postings on Handshake are down 16% year over year, likely reflecting employer caution over a potential economic slowdown; however, overall the job market remains strong for new graduates, even when considering the slight decrease in job postings in recent months.
  3. Changes in industry job postings for early career talent (demand from government is strong while demand from the tech sector has weakened) reflect wider trends as seen in government data.

Handshake data shed light into the labor market

Handshake’s focus on helping college students and recent graduates find jobs—and the data that comes from its network of early career job seekers and employers— provides a unique glimpse into how the labor market is performing for a demographic that is otherwise hard to extrapolate.

Job postings on Handshake not only provide further insights into the job market for new college graduates—they also might serve as a bellwether for how the labor market is performing.

New graduates are unique in a couple of ways. They tend to accept lower wages in exchange for on- the- job training, so are often less expensive alternatives in labor markets that have more slack in them. They also likely do not have the same relationships with employers as more experienced hires who are already in the labor market. As a result, they may face lower demand from employers who are weighing hiring new graduates versus laying off existing workers if there is an economic downturn. Therefore, how they are faring in the job market could serve as a predictor for how other members of the job market will make out in coming months.

Government data provide partial views into the job market for early talent

According to data from the Federal Reserve Bank of New York, the last four years have seen a reversal in a decades-long trend in which new college graduates had an easier time finding a job compared to most workers. The pandemic further heightened the gap between the unemployment rate for all workers and the unemployment rate for those ages 22 to 27 with a bachelor’s degree or higher—meaning young college educated talent are facing higher unemployment rates than the overall labor force, which includes older workers who do not have a college education.

Students who graduated at the height of the Covid-19 crisis were subject to uncertainties in the job market (rescinded offers, fewer opportunities), which reflected uncertainty in the economy. While the reopening of the economy allowed many of the class of 2022 to find jobs and the unemployment rate to fall, it looks as though fears of a recession are once again having an impact on this group. In June, the unemployment rate for recent graduates was 4.1% compared to 3.5% for all workers. Even with this disparity, it’s important to keep in mind that these unemployment rates are still very close to historical low.

Job postings on Handshake track demand for early talent

When looking at full time job postings on Handshake, we see that there was a surge in demand for college students and new graduates at the beginning of the year by employers who had been on the platform for at least a year. This trend mirrors what was seen in the government data with unemployment rates reaching pre-pandemic lows and job openings topping 11 million for the first time in October 2021 and for the majority of 2022.

Starting in April, however, that demand began to cool down, as witnessed by a slight slowdown in the annual growth in full time job postings on the platform. By September, the year over year growth of job postings on Handshake was down 16%, which likely reflected employer caution over a potential economic slowdown.

That said, given the huge increase in hiring earlier in the year, the job market remains strong for new graduates, even when considering the slight decrease in job postings in recent months.

Demand for early talent by industry matches external government data

The industry breakdown of the year-over-year growth rates for job postings in September provides further insight into changes in the economic environment. The surge in government job postings reflect the difficulty the public sector has had in hiring since the pandemic. The Job Openings and Labor Turnover Survey data for the August 2022 period show that the public sector hired at a rate of 1.8%—in comparison, the rate of hiring in the private sector was 4.5%. Public sector salaries have trailed behind private sector salaries, and government agencies may be looking to hire relatively inexpensive talent by tapping into new graduates.

The slowdown in job postings in the technology sector (down 40% Y/Y) reflects a slowdown after a huge hiring spree for that industry earlier in the pandemic, as well as the implementation of hiring freezes and layoffs by some of the larger firms in the space. At the same time, crypto prices have tanked and VC funding has slowed, which has had a direct impact on hiring at smaller tech firms.

Given the surge in hiring earlier this year, demand for new grads still remains robust compared to historic trends. The signals that we are seeing with Handshake data largely mirror what is seen with external government data with a slight slowdown in the labor market after a period of low unemployment rates, high wage growth and a large number of job openings compared to the number of unemployed people. Handshake data will provide continued insight on how the labor market is performing as we head into a period.

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