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The economic outlook for graduating seniors

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Tia Stephens | The Daily Wildcat

A sea of caps top the heads of the graduates during the 2020 Commencement Ceremony on the Mall on Nov. 5. The ceremony was held during this year's Homecoming a year and a half after students received their diplomas in May 2020 as the original ceremony was canceled on account of the pandemic.   

Based on past graduation data, the University of Arizona is expecting to see about 12,000 students graduate in the fiscal year 2021, with thousands of bachelor’s and master’s degrees, hundreds of doctorate degrees, as well as several hundred certificates awarded. At least 7,000 of those students will be graduating this spring. 

It is expected that the most bachelor’s degrees will be awarded in Psychology, the most master’s degrees will be awarded in Business Administration and Management and the most doctorate degrees will be awarded in Medicine.

These fresh graduates will be stepping into an economy that is still recovering from the COVID-19 recession and still faces problems due to the pandemic. Job prospects and market prospects for many graduating students can feel daunting, and with the extra layer of uncertainty brought on by recent events, the task of finding a job and integrating into an unstable economy can be terrifying. 

On April 1, the Daily Wildcat spoke with George Hammond, the director of the Economic and Business Research Center at the University of Arizona, who wasn’t nearly as pessimistic as the news might sometimes suggest we should be. 

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“[For] students coming out into a labor market where there's a lot of opportunities,” Hammond said, “particularly [for] those coming out this summer, it's going to be a good market.”

“Employers nationwide­­ — in Arizona and here in Tucson — are really struggling to hire,” said Hammond, citing the low levels that unemployment rates have fallen to in the United States. Those rates include near record lows for Tucson, where unemployment rates were at 2.8%. These low unemployment rates mean nearly everyone has jobs, which forces employers to compete for available workers in terms of benefits and wages. 

“That's the good news … the bad news is that the recovery has been a little bit uneven across sectors,” Hammond said. Degree fields do not perfectly predict the field that a young graduate will move into, but it can be expected that they will filter into the fields of their studies. Slow recovery for a specific industry or company can be a bad thing for the economy, but a good thing for anyone who wants to get into that field.

“Leisure and hospitality jobs are still way below where they were before the pandemic began,” Hammond said, “government jobs also are significantly below where they were before … in response, employers are raising wages and adding fringe benefits to those jobs to try to make them more desirable.”

“There has been job growth, particularly in trade, transportation and utilities,” Hammond said, turning to the sectors of the job market that are thriving. “Arizona is going to see strong manufacturing growth, particularly high tech manufacturing with the investment in semiconductor production up in the Phoenix area with Intel and TSMC.” 

The Economic and Business Research Center produces cutting-edge predictive economic analyses, which Hammond worked closely with, informing his positivity in various sectors of the economy.

“Most of the job growth is going to be in service-providing sectors like education and health. Travel and tourism is going to grow, [as well as] trade, transportation, utilities, especially transportation and warehousing, over the next decade,” Hammond said, referring to various economic sectors, as they are bundled together in their categories.

“Given the wave of retirements that have begun for baby boomers,” Hammond said, “there are going to be opportunities across all sectors, even in those that aren't growing in terms of net employment.” 

Hammond particularly stressed this point, while also recognizing that there will be significant growth in the future in several sectors, such as education and health; trade, transportation and utilities; travel and tourism; and professional and business services.

“Higher wages will mean more inflation,” said Martin Gray Hunter, director of Business Statistics and Workforce Technology at Eller College of Management. 

While higher wages will be necessary for these sectors to recover lost jobs, there is widespread concern that high inflation rates will negatively impact the economy, eliminating wage growth, savings and opportunities.

“Your decisions now impact you years from now,” said Hunter. “Inflation means less money saved today.” 

Hunter, as a well-regarded statistics lecturer at Eller, was quick to point out the importance of savings and compound interest and showed a general concern that people dealing with inflation would end up saving less, and would be heavily impacted in the future as a result.

“But [inflation] can also be leveraged … it lets you ask about raises, and negotiate wages,” Hunter said, highlighting one of the positive aspects of inflation.

“Inflation in February was up 7.9% over the year for all items measured by the consumer price index … that’s the fastest rate in 40 years,” Hammond said, pointing to federal income support, high savings rates and supply chain issues as causal factors. “Hopefully that will unwind as we go through the next year.”

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“What you want to watch out for, particularly as a new entrant in the labor market, is your starting salary,” Hammond added to some of Hunter's hopes. “It's nice when you come into a relatively tight labor market because it's easier to negotiate a competitive starting salary.” High inflation acting as a tool for better salary negotiation, along with high demand for workers in many fields, are factors that come together and that set graduates up for high starting salaries.

Stepping into a different topic, Hammond addressed the skyrocketing housing prices that many markets in the country are experiencing. “[In] Arizona — Phoenix and Tucson — we've seen house prices rise roughly 30% over the year,” he said, citing the data tracking this trend on the Making Action Possible dashboard, which aggregates extensive data on the Arizona economy.

Hammond directed attention to both supply and demand factors that could be driving up prices. “We've seen increased migration to Arizona during the pandemic,” Hammond said, “remote workers [are] moving away from the high-cost Western metros to more affordable markets like Arizona.”

“We're also seeing a kind of intra-metropolitan migration,” Hammond added, referring to the movement of people from cities to urban areas, again citing the trend in many work environments toward remote work.

“It’s not a lending issue,” said Hunter, recalling the 2008 housing crash, “we need more supply.”

“We saw a little supply response or even outright declines in supply,” Hammond agreed, referring to the rise in housing demand and prices, “housing permit activity is back to where it was in 2005-2006 during the housing boom, but the completions are lagging, in part because of elevated raw material prices.”

“Builders are having trouble … they're competing, like all businesses, for a workforce  — so that's contributed to slower construction,” Hammond said, pointing out that any combination of elevated demand and restricted supply would cause prices to rise rapidly. Long-term, it is likely that population growth in the United States will largely stabilize, and perhaps go negative, which will help housing prices stabilize. Until then, it will continue to be a challenge for fresh graduates to find affordable housing in many areas of the country.

Housing prices and inflation aren’t the only big issues that many young graduates will grapple with. A standing concern, pioneered by such figures as Andrew Yang, is the threat of automation. “It’s coming for jobs that are repetitive,” Hunter said, “we will need to find ways to retool the current workforce.”

“There's going to be more demand for your ability to work in complementary ways with technology,” Hammond said, addressing the worrying trend. “[You need] to be creative and entrepreneurial in everything that you do … those seem to be the job characteristics that are particularly resilient to automation.”

Another concern that many have is stagnating income growth. The Economic and Business Research Center tracks trends in personal income over time, which includes wages, but also welfare, dividends, interest, benefits, pandemic relief and other factors. According to the EBRC, personal income spiked during 2020 and 2021 due to the pandemic relief packages, then fell drastically in 2022.

“We don't have that huge federal income support in 2022 compared to 2021,” Hammond pointed out, referring to the pandemic relief bills and noting that the personal income growth rate is measured on the basis of the one year change, month to month.

While long-term wage stagnation can be a serious concern, it varies across industries and is something that can be accounted for by intelligent decision-making. Hunter noted that it is important to follow macroeconomic trends for precisely this reason, since knowing about a major change in the market — such as the growing demand for knowledge of data-driven decision-making — can help workers adapt. 

“Every business is a tech business now,” Hunter said, reinforcing this point. Wage stagnation, when considered alongside automation and inflation, can seem daunting, but both Hunter and Hammond strongly emphasized the ability of workers to adapt to changes, and remained hopeful for the future.

Hammond noted that any students looking for more information on economic trends were welcome to attend the Future of the Workforce event that the University of Arizona is hosting on April 21 at 4 p.m., where more detailed information will be available.

Flexibility, and willingness to embrace change, can be indispensable characteristics when dealing with volatile, uncertain job markets. This was the point Hunter decided to end on. 

“Nobody’s got it all together,” Hunter said, giving what he saw as an important piece of advice for graduating seniors. “There’s no one person who will know everything … it’s okay not to know.”


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