The large increase since 2007 in the unemployment and underemployment rate of young college grads, along with the large increase in the share of employed young college graduates working in jobs that do not require a college degree, underscores that today’s unemployment crisis did not arise because workers lack the right education or skills. Rather, it stems from weak demand for goods and services, which makes it unnecessary for employers to significantly ramp up hiring. The figure [above], from this report on the labor market prospects of the Class of 2013, gives unemployment and underemployment rates for college graduates under age 25 who are not enrolled in further schooling. The unemployment rate of this group over the last year averaged 8.8 percent, but the underemployment rate was more than twice that, at 18.3 percent. In other words, in addition to the substantial share who are officially unemployed, a large swath of these young, highly educated workers either have a job but cannot attain the hours they need, or want a job but have given up looking for work.

Heidi Shierholz at the Economic Policy Institute writes The underemployment statistic covers those working less than full-time hours even though they want full-time work. But they don't cover young college graduates who are working at jobs that do not require a four-year college degree. Even in good times, many graduates work at such jobs for a variety of reasons that often have nothing to do with economics. That is, they could find a job in their field if they wished, but they have other concerns at the moment.

However, from 2000-2007, the percentage of young college graduates working in jobs they were "over-educated" for increased. And it increased still more during the Great Recession, which officially began in December 2007, as jobs for new college graduates dried up as millions already in those jobs were laid off. This shift has improved only marginally since then. In research soon to be released, Shierholz's colleague Andrew Sum found that 47 percent of employed college graduates under age 25 were working in jobs that didn't require a four-year degree in 2007. By 2012, this percentage had risen to 52 percent.

This year's college graduates face a very tough job market. But the data show that their prospects aren't weakened because they lack the right skills, Shierholz says, rather because the continuing weak demand for good and services by consumers means employers don't need to add significantly more workers regardless of their levels of education.

One grim aspect of the weak labor market is that young graduates will take jobs not in their field or take jobs in their field that pay less than was paid to new entrants several years ago. Studies show that such coerced choices can have a lasting impact. Thus, graduates in the class of 2013 on average are likely to be earning less 10 or 15 years from now than they would have had they received their diploma when the economy was healthy.