For Class of '08, A Scramble for Jobs
By ANJALI ATHAVALEY The Wall Street Journal April 8, 2008; Page D1
As the credit crunch roils financial markets and the U.S. economy sputters, new college graduates are plunging into the rockiest job market in recent years.
The bleaker picture is in stark contrast with last year, when colleges and employers reported robust hiring, and students in finance, accounting and other hot fields were choosing among numerous offers. Now, companies that just a few months ago were planning substantial increases in entry-level hiring have scaled back their plans as economic conditions have worsened. In turbulent areas such as financial services, some firms are slashing the number of fresh graduates they intend to employ, and students are curtailing expectations of finding their ideal position.
Ken Goldstein, a labor economist at the Conference Board, a New York business research group, says the shift in mood is going to be particularly difficult for seniors who haven't already secured a job, "especially those graduates with C or B-minus averages." In the current climate, employers "tell folks, 'Don't call us, we'll call you,'" Mr. Goldstein says. "That sort of has been the modus operandi when the economy gets this slow."
The latest unemployment figures reinforce the gloom. The jobless rate rose to 5.1% in March, the highest since September 2005, the Labor Department reported Friday.
To cope with the gloomier outlook, some graduating seniors are opting for jobs they think are less likely to be affected by tumult in the financial sector. James Auger, a 22-year-old human communications sciences major at Northwestern University in Evanston, Ill., had hoped to start a career in banking, but he recently accepted a job at Health Care Futures LP, a consulting firm in Itasca, Ill. Part of the reason, he says, was "because they weren't really attached to the market as much as the banks were."
There are some bright spots for the Class of 2008. Government hiring remains robust. In fields such as health care and technology, some businesses are hoping to sign on more newly minted grads than last year, while companies in other fields say they're keeping their hiring goals steady. Meanwhile, some seniors headed for careers in finance, consulting and other hard-hit sectors locked in offers from employers last fall, when the outlook for the U.S. economy was less gloomy.
Sarah Quarterman, global head of campus recruiting at Merrill Lynch & Co., says that despite the downturn in finance, banks are unlikely to cut back on hiring to the extent they did in 2000. "Everyone learned the lesson that it wasn't the smart thing to do because students that get hired from campus are a pipeline for the organization," she says. "What a lot of firms experienced in 2005 and 2006 was a shortage of talent at the VP level," typically five or six years out of school.
Still, the overall mood in the job market has taken a dramatic downturn from just a few months ago. According to a survey conducted last fall by the National Association of Colleges and Employers, a Bethlehem, Pa., nonprofit, large employers initially expected to boost hiring of new graduates 16%, on average, this year from last year's levels. After redoing the survey in February, NACE found employers planned a more modest 8% increase overall. Within financial services, hiring is now anticipated to fall 7.5% this year, as investment banks announce sweeping cutbacks.
Even offers made last fall aren't set in stone. At Bear Stearns Cos., whose planned acquisition by J.P. Morgan Chase & Co. is expected to result in thousands of layoffs, half of the 100 or so job offers to graduating seniors are being rescinded, mainly in areas where the two firms overlap, according to a person familiar with the matter. J.P. Morgan says all its offers to graduating seniors remain valid.
Among other financial-services firms, Citigroup Inc. says that its hiring of undergraduate students is down 10% this year. Merrill Lynch's number of college hires is flat this year after increasing last year. Deloitte LLP says it is employing 6,000 college juniors and seniors this year for full-time or intern positions -- the same level as last year. In previous years, the accounting firm has seen increases of about 10%. "It may not be as dramatic of a growth as the year prior," says Diane Borhani, head of U.S. campus recruiting at Deloitte. "We are going to be a little smart."
College seniors are feeling the pressure to secure a job earlier in the year. Trudy Steinfeld, executive director at the Wasserman Center for Career Development at New York University, says that 45% of the senior class has full-time job offers so far, up from 40% this time last year. She attributes the increase to students accepting the first job they are offered. "The talk on campus is that if you have an offer, this isn't the year to go shopping," she says.
Scott Bell, who plans to graduate this year from New York University with a degree in East Asian studies, was looking for a job in financial services or consulting. The 21-year-old was unable to land interviews with major investment banks, despite a strong grade-point average and an internship in the Tokyo office of global management consultancy Bain & Co. Mr. Bell received an offer for a consulting job in Deloitte's New York office in November. Rather than wait for more offers, Mr. Bell accepted. "In this economic situation, everyone was a little worried," he says. "It would be better for me to take what I had."
Companies in sectors that saw robust increases in recent years say their hiring is flat this year. International Business Machines Corp. says it hired 5,000 people in the U.S. last year, 36% of whom were recent university graduates -- the same as in 2006. This year, "given the broader economy in the U.S., we don't see huge growth," says Vera Chota, manager of university recruiting for IBM.
Certain skills still are in strong demand, says Ms. Chota, adding that the company can't find enough qualified graduates with degrees in computer science and those who have knowledge of both business and IT. "In the U.S., unfortunately, there are not enough great computer-science graduates," Ms. Chota says. On college campuses, career-services directors say job offers have continued to flow in from employers in health care, information technology, and the nonprofit and government sectors. Demand for skilled workers in industries like computer science is boosting the average starting salary 4% this year from last, according to a NACE survey.
A breakdown by industry shows that starting salaries for accounting and finance grads rose by a mere 1.9%, while business-administration and management graduates saw increases of less than 1%. The average offer for computer-science majors, on the other hand, rose 7.9%. Engineering graduates saw an average increase of 5.7%.
The job outlook for new graduates can vary from college to college, depending on a school's location and its rankings in certain industries. The University of Texas at Austin undergraduate school of business, where approximately 70% of college seniors find jobs within the state, 75% of seniors have received job offers so far, on par with last year. With oil prices hovering near historic highs, the university is seeing strong demand from energy companies in Texas, who typically hire undergraduate business students for positions in marketing, supply-chain management or corporate finance, says Velma Arney, director of undergraduate career services at UT's McCombs School of Business.
College juniors, meanwhile, are anticipating tough times ahead. "It's probably going to be a lot more difficult" for next year's graduating seniors, says Karim Hemani, 21, a business honors student majoring in finance at the University of Texas at Austin.
Mr. Hemani, a junior, says that when he tried to find an internship in investment banking for the coming summer earlier this year, recruiters warned him that the labor market would be tighter for his class. He eventually landed an internship at Tudor, Pickering, Holt & Co. LLC, an energy investment firm in Houston. Among college juniors, "the sentiment is a lot more negative right now," he says.