It's no secret that the unemployment rate for those with college degrees is much lower than the rate for those without. And the fluctuations in the their respective unemployment rates have been very similar for as long as we can remember.

However, comparing the unemployment rates alone ignores some significant deterioration in the dynamics of the college-educated population.

Goldman Sachs economist Jan Hatzius examines this in a brief note to clients.

First, here's a look at the unemployment rates for college grads and those who didn't make it out of high school. No surprises here:



One worrying trend in the labor market has been the drop in the labor force participation rate. Intuitively, one might think that the labor force participation rate would fall more for the those with less education due to lack of skills (i.e. the skills mismatch issue).

However, this assumption is just wrong.

"As shown in Exhibit 2, the labor force participation rates of college graduates have actually fallen by more than those of workers without a high school education," wrote Hatzius.

Check it out:

This is where things get interesting.

"[T]he faster job growth among college graduates is entirely due to faster growth in the size of the college-educated population; the employment/population ratio among college graduates has in fact fallen sharply," wrote Hatzius.

In other words, America's colleges are cranking graduates so quickly that even though increasing numbers of them drop out of the labor force, the unemployment rate has effectively fluctuated right in line with the unemployment rate of those with less than high school degrees.

Considering all this, the most appropriate way to compare the two demographics is to compare employment rates relative to populations, which allows us to bypass the labor force participation rate issue.

That leads us to this damning chart from Hatzius:

Oy.

Here's Hatzius again to hammer it in:

[T]he employment/population ratio has fallen just as sharply among college graduates as among high school dropouts since 2007; in other words, the growth in the absolute number of employed college graduates has been nowhere near enough to offset the increase in the size of the college-educated population.

It just goes to show there's more to the store than the headline numbers.

"At first glance, [the unemployment rates] might suggest the US labor market problem is primarily due to mismatch between the supply and demand for different skill and education levels," he said. "But a second glance tells a different story."