Job Outlook for 2008 Graduates

College Graduates Benefit from Large Retiree Pool

By Phil Gardner

Despite the cautious and sometimes gloomy economic news released throughout the past several months, particularly in December and early January 2008, the college labor market outlook appears bright.  College students have baby boomers (those born between 1945 and 1962) to thank for the growth in opportunities this year.  Many large companies are faced with serious concerns as baby boomers prepare to retire and exit their current positions.  Companies are aggressively searching for new talent who can be trained and ready to assume mid-level or higher responsibilities within four or five years (just when those retirements start in earnest).

While the overall strength of the college labor market is impressive, graduating students should not assume a job offer will be awaiting them when they walk off the stage with their diplomas.   Several sectors of the economy are weak, especially housing and financial markets.  Some employers, especially medium-size firms (250 to 4,000 employees), intend to cut back on their hiring this year.  The advice to seniors is to prepare for a slower labor market than the numbers suggest.  Begin now to use your campus resources (well before graduation)!  Those seniors who wait until late spring or early summer may find job opportunities limited.

Dollars, Oil, and Copper

Several forces are conspiring to dampen economic growth.  While it is difficult and premature to predict a recession, the weakened housing sector and its impact on financial (credit) institutions have injected uncertainty into the economy.  The ripple effect from the sub-prime lending fiasco has now reached firms and individuals initially thought immune from this crisis. Credit rules have tightened making it more difficult for companies to borrow money; to raise necessary capital that could be used to expand operations.  

Firms are also facing higher costs for inputs such as metals, chemicals, and energy.  As countries such as India and China continue their strong growth patterns, the demand for resources to use as inputs for industry, housing, transportation, and other key sectors has risen sharply worldwide.  Higher demand has consequently caused prices to rise.  Employers are also feeling the pinch as labor costs have also crept upward, especially for health care and related benefits.  Medium-size employers who need to maintain in a competitive position are finding it difficult to expand hiring.

If you have been to the gasoline pumps recently, you know that the price of gas keeps inching up.  The energy sector is under stress from increased demand.  From all corners of the globe people are using more oil-based products from gasoline, fertilizers to pharmaceuticals. Further complicating oil prices is the weak U.S. dollar.  Oil is priced internationally in dollars.  As the dollar’s value against other currencies has dropped, oil producers have raised prices to hold revenues the same. 

A weak dollar does help us in some ways.  Export-oriented manufacturers and service providers are seeing strong growth.  Tourism to the U.S. is also growing, as foreigners with strong currencies can find real bargains in the U.S.

Finally, the U.S. consumer may be tapped out.  Over 60 percent of the U.S. economy depends on consumers spending money on products and services.  Over the past decade, Americans have spent well (aided by rising housing values); in fact, they have spent like no other group in the entire world.  The result has seen the U.S. savings rate dip below zero (we spend more than we earn) and credit card debt has grown. Consumers may run out of juice just as the other side of our economy has slowed down.

Job Opportunities

As employers began to firm up plans on their hiring intentions in the fall, 34 percent expected to increase their hiring over last year while 39 percent would decrease their hiring.  The remaining employers expected to hire the same number of college graduates as last year.  These figures are very similar to other labor studies conducted in the fall by Manpower and Career Builder, for example.  These studies described employer intentions as cautious.  Federal employment statistics, even though they have been fluctuating unexpectedly during the fall, paint a similar picture.

When the figures are disaggregated by degree level, the figures suggest a much stronger labor market for bachelor’s and MBAs than for other degrees.  These figures reveal that employer intentions for college hiring across all degree levels are not increasing as rigorously as last year.

From information provided by 910 firms and organizations (not including school districts), respondents to our survey estimate they will hire approximately 40,000 college graduates.  Overall total job opportunities will only expand by 2 percent over last year. However, bachelor’s degree hiring, which accounts for 77 percent of the total hires, is expected to increase by 7 percent.

The average projected hires (total) per company in this year’s survey is just over 46, which is lower than the 64 average projected in last year’s study.  This reflects the significantly great number of small and medium size employers responding this year.    

If you look at those employers who indicated that they would be increasing their hiring this year, they intend to expand bachelor opportunities by 29 percent over last year.  They will be hiring approximately 69 individuals per company. On the other hand, companies that are decreasing hiring plan to reduce bachelor’s-degree hiring by 37 percent and only hire, on average, 13 individuals per company.

Size Matters

Large employers, those with more than 4,000 employees, are aggressively pursuing college graduates this year.  Large companies are beginning to deal with the implications of the looming exodus of baby boomers from their employee ranks.  Some companies face the arduous task of replacing up to 60 percent of their current work force over the next decade.  Last year these companies began to ramp up their recruiting efforts.  This year companies with more than 4,000 employees plan to increase bachelor’s-degree hiring by 10 percent.  Importantly, their focus is on graduates with bachelor’s degrees. Their total hiring across all degrees will only increase by 5 percent.

Companies with 9 to 100 employees that have the capacity for rapid growth are labeled second-stage growth firms.  Start-up companies with generally fewer than 10 employees and second-stage companies comprise 78 percent of all firms and establishments (does not include education and government) and are responsible for 36 percent of all employees in the U.S.   Companies with fewer than 100 employees comprise 34 percent of the employers responding to our study.  This group expects to increase bachelor’s degree hiring by 13 percent and total hiring by 16 percent – almost all of these positions will be new positions and are not earmarked as replacements for retirees.

The news is not as good for companies with 100 to 300 employees, as they expect to decrease bachelor hiring by 13 percent and total hiring by 12 percent.  Their comments suggest that the weakness of the economy and rising costs have caused them to take a more conservative approach to the labor market.  For companies with 301 to 3900 employees, the news is slightly better as they will increase bachelor hiring by 1 percent.  This group was also very cautious, injecting comments that if the economy continued to weaken they may have to pull back their hiring goals for the year.

Hot Majors! Hot Jobs!

From the compiled list of majors that employers indicated they were interested in recruiting, approximately 50 percent were seeking business majors (not including marketing and accounting), 36 percent engineering majors, 22 percent computer science, 19 percent marketing, accounting 17 percent, and 28 percent social and humanities majors.  From this list we pulled what appear to be the majors most in demand.

Hot Majors

• Civil Engineering
• Environmental Sciences
• Nursing
• Accounting
• Electrical Engineering
• Marketing
• Business Administration
• Finance
• Mechanical Engineering
• Computer Science (all)
• Agricultural Business
• Mathematics

While mortgage lending firms are not hiring to any great extent, other financial services and insurance companies have plans to increase hiring by 17 percent.  The professional services sector that is the home for engineering services, accounting, management consulting, scientific research, marketing research, public relations and advertising firms is expecting to increase hiring by 13 percent.  However, some subsectors such as advertising and public relations are bracing for a slowdown if the economy should weaken further.

Government is expected to remain strong for selected agencies.  However, federal budget limitations have caused some agencies to retrench from early forecasts for increased hiring.  Hospitality opportunities in restaurants and lodging establishments remain strong. 

Starting Salaries

Forty-six percent of the employers who reported their starting salaries indicated they do not plan on raising salary levels from last year.  Fifty-three percent will raise salary offers by an average of 4.2 percent.  This increase is nearly double the amount indicated last year.  Twenty-five percent of those reporting salary are preparing to make significant salary increases from 5 to 15 percent.   Based on the salary information provided for this study, the average starting salary at the bachelor’s level is estimated to be approximately $43,500.  This figure is tilted toward the higher salaries offered in technical fields.  The following list provides a sample of starting salaries for selected majors.  More detailed salary information can be found at our Web site. (www.ceri.msu.edu).

Employers would like to avoid paying a new hire a bonus; only 10 percent indicated that they would.  However, employers may have to reconsider, especially those hiring engineering, accountants, computer science majors.  Because the market is competitive for these majors, bonuses are becoming more common.  A method that 20 percent of employers are using in an effort to limit turnover is to offer a bonus or performance premium at the completion of the first year of employment.

Do Employers Really Like College Graduates?

Based on stories in the media, it would seem that employers are frustrated by the attitude and lack of commitment displayed by some young adults.  So we went in search of what employers like about new college hires.  Young adults, we found, bring more positives than negatives to the workplace.  Young adults come with plenty of enthusiasm, fresh ideas, technical aptitude, and solid communication skills. These were the top four attributes listed by employers.  Also in the mix are team work, willingness to learn, adaptability (can handle change), and analytical thinking.

The Best Way to Land a Job: Internships

The largest expansion in hiring will be from employers using their internship and co-op talent banks.  In fact employers are adamant that college students must have an internship or relevant work experience to even be considered for employment. Internships offer a more realistic idea of what being in the adult world is like, as well as how to behave and what will be expected of a new employee.  Employers are so focused on these experiences that 50 percent indicated that it is now necessary for candidates to have two internships prior to graduation.  The need to have multiple experiences can be traced to two immediate factors: 1) being able to differentiate students quickly when dealing with a large pool of applicants; and 2) a new hire with more workplace skills and exposure will  get off to a faster start.

Final Thoughts

This year’s labor market promises to be a good one for college seniors!  If seniors started their job searches in the fall or at least began the process by preparing resumes and identifying potential companies, they will be in a better position to land a job. But the early bird may be the winner.  The economy has continued to weaken since the fall. This weakness may cause employers to pause and reevaluate whether to hire during the spring.  Those who procrastinate may find the labor market closer to graduation to be very different from the market described by employers back in the fall. 

Companies of Recruiting Trends 2007-2008 can be ordered from Instructional Media Center at Michigan State University phone: 517.353.9229 or through the web: http://orders.oip.msu.edu/product_p/470.04.htm