If you have followed the news the last couple weeks, you have seen loads of articles predicting economic Armageddon. It is possible the media’s hysteria may have tangible negative economic impacts, but I am sufficiently stressed, so I will join the chorus. A brief disclaimer: All of this terror is preemptive. Economic trends can change, and if they do, this article and the anxiety that bred it would be rendered moot. And always remember that economists have a less than stellar record when it comes to predicting recessions. 

But, for now, the stress is real! And if the forecasters are right, we — college students — will disproportionately feel it. Over the last year, pessimism about the U.S. economy’s outlook has become routine as the stock market has fluctuated along with President Donald Trump’s tariff whims. But this is different. On Aug. 14 the yield curve inverted, meaning the interest rates on 10-year government bonds were lower than those for two-year bonds. In other words, the market began thinking the US economy’s long-term outlook was less risky than its short-term. That set off lots of alarms. The last six inversions of the yield curve each preceded a recession every time. The typical lag time? Between one and two years, meaning many current college students could very likely enter a recessionary economy post-graduation. As young people entering the labor market, a recession would have a serious impact on our futures more than any other generation.

Academic research shows that graduates entering the labor force during a recession are kind of screwed. They are more likely to be unemployed, since firms hire less during recessions. If someone does manage to land their first job, they are more likely to be overqualified for it because firms become more risk averse. And those impacts last. Initial overqualification has long term consequences since it can delay promotion and reduce motivation. Recession graduates also have lower starting salaries, and though the gap is modest, it persists for approximately 10 to 15 years after labor market entry. 

Those 10 to 15 years of diminished income matter, and research shows they impact the rest of recession graduates’ lives. By the time the income gap fades, key personal financial decisions may have been delayed or abandoned. For example, recession graduates are less likely to be married, have children, buy a home or car. They also start saving for retirement later. 

The impacts are also behavioral. Not to get too morbid, but recession graduates are more likely to die in middle age. It is not clear why. One suggestion is financial precarity throughout the first 10 to 15 years of work leads to less healthy lifestyle choices. The other possibility is without consistent or challenging work, an unstable transition from school into the labor market makes it more difficult to shed unhealthy habits from school, like binge drinking or poor sleep habits. No matter the cause, it is not a happy picture. 

Recessions disproportionately impact many demographic groups, not just college graduates. According to an ACLU report, by 2031, the Great Recession will have reduced the wealth in Black households by 29 percent more than in white ones. Furthermore, a higher proportion of low-income households reported they were in worse shape after the Great Recession than wealthier households. And though college graduates suffer, recessions are far more destructive for high school graduates entering the labor market. 

The possibility of graduating into a recession would be a bummer if it was part of the natural economic cycle, but it is particularly frustrating because this potential recession has been expedited. The first and most obvious preventable cause is President Trump’s trade war with China, which has raised consumer prices and unsettled investors. The second attainable way to prevent or delay recessions in countries with labor shortages is to increase immigration. Much of the international economic anxiety is over reports of recessions in developed economies experiencing population loss, like Japan, United Kingdom and Germany (also the United States). Yet none of them have meaningfully increased immigration to fill open jobs. Meanwhile, at the time of this writing, the Trump administration is denying that we may be headed towards a recession for political purposes and has thus ignored any of the preventative steps it could take. 

The potential that we may be recession graduates thanks to our government’s economic mismanagement has filled me with a lot of frustration for the past couple weeks, but in the research, there is a silver lining. Recession graduates are on average happier than labor market entrants into a healthy economy. The theory behind the data is recession graduates are just grateful to be working and spend less time thinking about other possible career paths. Recession graduates also seem to be less narcissistic, perhaps because they had to overcome more hardship during their initial working years. These attitudes can have tangible manifestations. CEOs who were recession graduates were less likely to commit a certain kind of business fraud (backdating stock options) ubiquitous at the turn of the century. 

How the economy fares over the next couple years will likely have a disproportionately large impact on the rest of our lives. If things go poorly, our bad graduation timing will limit our generation in many tangible ways. That is scary, but ultimately beyond our direct control. What is partly under our control is how we approach the work we are doing. Instead of letting fear and frustration consume us, we should focus on channeling the philosophy that recession graduates hold: An appreciation of the work we do, regardless of the economic conditions around us.

Solomon Medintz can be reached at smedintz@umich.edu.

Leave a comment

Your email address will not be published. Required fields are marked *