Federal Reserve Economic Data

The current softening in the labor market is hitting recent college graduates especially hard, suggesting the traditional college premium may be weakening. At least for quickly landing a job. In this post, we take a longer view of the unemployment gap between college graduates (with a bachelor’s degree or higher) and high school graduates (with no college).

The graph shows a persistent and significant disparity between the two unemployment rates: From 2000 to 2025, high school graduates consistently faced unemployment rates at least 2.3 percentage points higher than those for college graduates. This enduring gap reflects structural differences in the types of jobs each group holds: College-educated workers are more likely to have jobs that are less susceptible to cyclical layoffs and economic disruptions.

The gap is most pronounced during economic downturns.

During the Great Recession (2008-2010), the unemployment rate gap between workers with and without college degrees spiked dramatically, to about 7.8 percentage points. We see a similar pattern during the COVID-19 pandemic in 2020. This pattern highlights the greater vulnerability that less-educated workers have to economic shocks and suggests that higher education provides both access to better employment opportunities and greater job security during recessions.

The gap shrinks but persists in times of tight labor markets.

In tight labor markets, the gap narrows significantly but never disappears. During the long recovery of the 2010s, as the labor market improved, the gap gradually shrank to just above 2 percentage points. A recent FRED blog post shows that the unemployment rate gap for young workers disappeared altogether during the first months of post-pandemic recovery and has remained at historically low levels since then.

Higher unemployment can have lasting effects.

The lack of job security for workers without college experience can lead to lower wages and lower lifetime earnings, as frequent job losses interrupt career progression and skill development. This educational divide in employment outcomes underscores the economic value of higher education in the American labor market.

How this graph was created: With data graphing tools in FRED, we’re able to subtract the unemployment rate of college graduates from the unemployment rate of high school graduates and graph a single data series. Search FRED for and select “Unemployment Rate – College Graduates – Bachelor’s Degree and Higher, 16 years and over.” From the “Edit Graph” panel, use the “Customize data” field to search for and add “Unemployment Rate – High School Graduates, No College, 16 years and over.” In the formula section, type b – a. Under “Modify Frequency,” choose “Semiannually” and keep the “Aggregation Method” as “Average.”

Suggested by Serdar Ozkan and Nicholas Sullivan.

How do prices change over time?

Prices tend to go up, especially over long periods. But some prices can increase much faster than others and some can even decrease. Over the past 40 years or so, price changes for goods have tended to be lower than price changes for services.

Our FRED graph above uses data from the consumer price index release table to track price changes for some specific goods. The average CPI, shown by the solid blue line, is noticeably higher than the values for all the specific goods listed in the graph.

Our FRED graph below tracks price changes for some specific services. The average CPI, shown by the same solid blue line, is noticeably lower than the values for all the services listed in the graph.

Why are price changes for goods below average?

Increases in quality and productivity have allowed for slower increases in the prices of many goods and even some actual price declines.

The quality of cars has improved considerably. These enhancements have to be factored-out to get a genuine apples-to-apples price reading that can be compared over time.

For example: If you pay $35,000 for a car today and 8 years ago you paid $25,000, then the difference in purchase price is $10,000. But consider this: You’re also getting the most modern features with your new car, such as automatic emergency braking and keyless entry with biometric access. Those features weren’t available when you bought your previous car. So, because you’re getting much greater value with this purchase, the adjusted CPI price increase would be much less than $10,000.

The same applies to computer equipment, which wasn’t even a consumer good in the early 1980s.

Productivity in manufacturing has also improved considerably. Apparel, toys, and car parts, for example, can be produced much more efficiently or in lower-cost locations than before. As engineers find more efficient ways of making things, those things become (relatively) cheaper.

Why are price changes for services above average?

It is much more difficult to improve productivity for services than it is for goods, so services have gotten much more expensive. Consider education and medical care, for example. You cannot successfully increase classroom size beyond some point, and you cannot put more patients in a single hospital bed. Another example is the barber: Technology improvements in hair cutting have been very limited, and barbers still serve roughly the same number of customers each day as they did 40 years ago.

Of course, the rise of artificial intelligence may create new trends for some services. A topic for another day.

One more thing to know about the CPI

A good that has actually gotten much more expensive over time is tobacco products. These products have had increasingly higher taxation for several decades, with the intent to reduce their consumption. Helpfully, the CPI accounts for taxes when it calculates price changes.

How these graphs were created: Start from the CPI release table noted above, which you can find in the notes for the CPI graph or any of its components in FRED. Check the series you want displayed. Click on “Add to graph.” Change the start year to 1983.

Suggested by Christian Zimmermann.

The FRED Blog often discusses inflation—in particular, the consumer price index reported by the US Bureau of Labor Statistics. The CPI from the BLS measures the average change over time in the prices paid by urban consumers for a representative basket of consumer goods and services.

Over the years, the BLS has improved the official CPI by updating samples and weights, expanding coverage, and enhancing how it calculates the numbers. Sometimes the BLS also produces experimental versions to explore alternative methodologies. One of these experiments is the harmonized index of consumer prices (HICP).

Our FRED graph above shows the year-over-year inflation rate measured by each of these indexes. They differ in a  few ways.

• Solid blue line: The CPI inflation rate estimates price changes for the noninstitutional urban population. It doesn’t include the rural/nonmetropolitan population in its coverage, due largely to the difficulty involved in sampling the remote and sparsely populated areas of the country.
• Dashed green line: The HICP inflation rate estimates price changes for the entire population, both urban and rural. And, unlike the CPI, it excludes cost measures of owner-occupied housing. (Learn more about how CPI measures housing inflation.)

Despite the methodological differences between the CPI and HICP, both price indexes generally yield very similar inflation rates. The most visible differences are noticeable during times of heightened inflation volatility, such as the Great Recession of 2007-2009 and the post-Covid inflation ramp-up and slow-down from 2021 to 2024.

To learn more about this topic, visit the BLS and read this Monthly Labor Review by article Walter Lane and Mary Lynn Schmidt.

How this graph was created: Search FRED for and select “Consumer Price Index for All Urban Consumers: All Items in U.S. City Average.” Click “Edit Graph” and the “Add Line” tab, then and search for and select “Harmonized Index of Consumer Prices: All-Items HICP for United States.” Last, use the “Edit Lines” tab to change the units to “Percent Change from Year Ago” and click on “Copy to all.”

Suggested by Diego Mendez-Carbajo.