The end of the overeducated barista era?

After the Great Recession those with bachelor's degrees were taking positions as waitresses and receptionists, leaving those with less education to scramble for lower-skill jobs. Photo / Thinkstock

The era of the overeducated barista in America is coming to a close.

In the wake of the Great Recession, the ranks of the unemployed in America doubled, reaching more than 15 million people at its peak. Competition for the few open jobs was fierce, and businesses could pick candidates with the best resumes, even if the positions didn't require all of their skills.

The result was an army of underemployed workers. One analysis estimated that half of all recent college graduates in 2012 were either underemployed or out of work. Those with bachelor's degrees who couldn't get hired in their fields were taking positions as waitresses and receptionists, leaving those with less education to scramble for lower-skill jobs. It was a sign of just how dysfunctional America's job market had become.

"That's not good for the economy in the long run," said Jonathan Willis, vice president and economist at the Kansas City Federal Reserve. "You want a good allocation of workers, which ties to issues like productivity."

His research with fellow Fed economist Didem Tuzemen shows the trend is finally starting to reverse course. Over the past year, high skill jobs accounted for more than 80 per cent of net job growth. Not only has that translated into stronger employment for college graduates, but it also means firms are increasingly hiring those with less education into high skill jobs as well.

That is opening doors all the way down the line, their analysis found. No longer do college graduates make up the bulk of those hired into middle-skill jobs. Instead, workers who have not graduated high school are driving the employment growth in those positions. And high school graduates are moving out of low-skill jobs into middle- and high-skill ones.

That's all good news for the class of 2015. The New York Federal Reserve found that the demand for college-educated workers has picked up over the past year after flatlining in 2013. And it's risen more than 10 per cent in the first few months of this year.

Consequently, the underemployment rate for recent college graduates has fallen to 44.6 per cent, down 2 percentage points from its peak a year ago. The unemployment rate for new grads has also reached a post-recession low of about 5 per cent.

"The tide has turned," New York Fed economists Jaison R. Abel and Richard Deitz wrote in their analysis.