Young college graduates have long had lower unemployment rates than Americans of the same ages without college degrees, which is what you might expect: College graduates can get jobs that require degrees, and they can get jobs that don’t. Non-graduates can choose from only the latter.
The narrowing of this unemployment gap in recent years has lent support to narratives that college diplomas are losing their value amid the rise of large language models, the purported return of blue-collar work and other job market changes. But while it may well be that diplomas have lost value, the recent shrinking of the young-adult education-unemployment gap seems to be driven mainly by a different phenomenon. Growing numbers of young adults without college degrees simply aren’t trying to find work and thus aren’t counted in unemployment calculations.
The US Bureau of Labor of Statistics does not publish employment statistics by educational attainment for narrow age groups like this, but it’s possible to estimate them using the microdata (individual survey responses) from the monthly Current Population Survey that the Census Bureau conducts and the BLS relies on for many of its key employment indicators. For several years, the Federal Reserve Bank of New York has been estimating unemployment rates for college graduates and non-grads ages 22 to 27 this way, and its statistics have driven much of the discussion about the shrinking advantage of a degree. My estimates here are for ages 25 to 29 in part because I’m new to CPS-microdata crunching and wanted to be able to check some of my calculations against numbers that the BLS does publish for this age group (it doesn’t publish anything about the 22-27 group) and in part because the Census Bureau “perturbs” the ages in the CPS microdata to make it harder to identify individual respondents, and this affects employment numbers less for the 25-29 age group than for younger people.
But back to those young adults without college degrees who aren’t looking for work. The unemployment rate is the number of unemployed people divided by the labor force, which is made up of employed people plus unemployed people. Crucially, the number of unemployed isn’t everybody without a job; it’s everybody who is without a job and is actively seeking one — the question on the Current Population Survey asks whether the person has “been doing anything to find work during the last 4 weeks.” The labor force participation rate, which is the labor force divided by the civilian, noninstitutional population, indicates how many people aren’t looking for work. Labor force participation has been rising fitfully among college graduates ages 25-29 and is higher than it was before the Covid-19 pandemic. It’s been flat to down recently among Americans in that age group without college degrees and is lower than before the pandemic.
One can visualize what’s going on more clearly by just comparing the two gaps. Over the past decade, the labor force participation gap by education for Americans ages 25 to 29 has increased by almost exactly the same amount as the unemployment gap has fallen.
I am not the first person (or even the first journalist named Justin) to note that falling labor force participation among non-grads is putting downward pressure on their unemployment rate and probably explains most of the shrinking of the young adult education-unemployment gap. But I don’t sense that this message has really broken through yet.
The most straightforward measure of the health of the job market for any demographic group is the share of that group that is employed. Going by their employment-population ratios, today’s Americans in their late 20s — college grads and non-grads alike — are doing better than their predecessors in the early 2010s (the post-financial-crisis US economy was truly awful for young adults) and worse than those of that age at the booming turn of the millennium. But while the employment-population ratio for young college grads is not far off from where it was just before the pandemic and seems as if it might be headed upward again after a sharp drop in 2023 and 2024, for non-grads it is 1.7 percentage points lower than before the pandemic and clearly trending downward.
Those 1.7 percentage points work out to about 240,000 non-grads in their late 20s who would have jobs if the group’s employment-population ratio had stayed the same. Do the same exercise with labor-force participation, and it’s about 135,000 missing non-grads. That’s not enough people for statistics derived from population-wide government surveys to be able to offer much reliable information on why they’ve dropped out. But the overall picture is of a job market that college grads are better able to navigate than non-grads.
They are navigating it partly by taking jobs for which they are overqualified. A 2024 report by the Burning Glass Institute and Strada Institute for the Future of Work found that, a year after graduation, about half of US college grads were in jobs that “do not require a degree or make meaningful use of college-level skills.” The wage premium that college-educated workers enjoy over non-grads, which rose sharply in the 1980s and 1990s, has stagnated since. But it hasn’t really declined — in the New York Fed’s data, the median college-grad worker 22 to 27 earned 50% more than the median 22 to 27 non-grad in 2025, a premium roughly equal to the post-2000 average. And the young adults struggling most to find their way in the current strange job market appear to be those without college degrees.
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