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Job Market Remains Sluggish

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The national labor market continues to slowly improve, but so many people with work experience are still seeking jobs.

This is making it another tough summer for high school and college students who want to work as well as new college graduates entering the workforce.

Making matters worse, the mounting debt that college graduates are carrying is likely playing a role in the sluggish housing market.

Even though the national unemployment rate dipped to 6.1 percent in June 2014 compared with 7.5 percent a year ago, the Labor Department’s rate that accounts for people who have stopped looking for work or cannot find full-time jobs is almost double at 12.1 percent.

And while the number of people jobless for 27 weeks or longer fell to 3.1 million in June, it still made up 32.8 percent of the unemployed.

With so many experienced workers to choose from, it’s not surprising that the unemployment rate for 16 and 17 year olds stood at 23.3 percent in June and was 19.3 percent for 18 and 19 year olds, according to the Labor Department.

A quick review of openings on job posting sites for the Richmond area show students have plenty of job possibilities as receptionists, office clerks, cashiers and customer service representatives. One problem they may face, however, is that employers need someone year round rather than just during the summer.

College graduates who are looking for full-time employment might be having an easier time finding jobs based on the jobless rate for 20 to 24 year olds that stood at 10.5 percent in June.

As usual, employability varies greatly based on skill sets. There are hundreds of job openings for registered nurses in the Richmond metro area, but only three postings for photographers.

The sluggish job market along with the debt college students have incurred is one factor contributing to slow growth in the housing market.

Based on data from the Federal Reserve Bank of New York, 43 percent of 25 year olds had student debt in 2012 compared with 25 percent in 2003.

And the average debt carried by 25 year olds was $20,326 in 2012, nearly double from the $10,649 in debt in 2003.

The average student loan per borrower for all ages in Virginia was $26,310 in 2012, compared with an average of $24,810 across the nation, according to the New York Fed.
Some troubling trends become apparent when we consider the percentage of borrowers with student loan debt who have home mortgage debt at age 30, which historically has been about the median age for first-time home buyers, according to the National Association of Realtors.

In 2003, for instance, a higher percentage of 30 year olds with college debt were able to have a home mortgage as well a student loan, largely because the average student loan debt was much smaller than it is today.

This is not surprising because those who were college-educated in 2003 earned higher incomes on average than those without a college education, and student loan debt was low enough so that it did not deter a home purchase then.

But this past recession was a tipping point for the traditional 30-year-old first-time home buyer.

Educated consumers with student loan debt as well as buyers without student loans saw home ownership rates fall, but they fell more dramatically for those with a student loan. In 2013, 30 year olds without student loans — presumably not college educated — were more likely to have purchased a home with a mortgage.

These new trends suggest that for some individuals who are about 30 years old, the single biggest lifetime investment is not a home but an education.

(This article first ran in the Richmond Times Dispatch)

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