By David Morgan
WASHINGTON (Reuters) - Nancy O'Leary is proud of her son, and with good reason. After graduating from the University of Michigan this spring, he landed a research job on Wall Street -- no mean feat in troubled economic times.
Success for the sports management major came after he decided he needed to bolster his resume with a bachelor's degree in economics. After spending another year in school to get one, he wound up with a pair of handsome job offers.
"He told us: 'Given the economy, Mom and Dad, I don't want to narrow my chances,'" said O'Leary, who lives in the Boston area. "Kids with degrees in business, economics, engineering and nursing are getting good jobs."
College moms are not often looked to as prognosticators of the U.S. labor market. But experts say O'Leary is right. America's employment picture has begun to look brighter for new college graduates in a small number of fields.
It is the first upswing in hiring for graduates in two years, according to Michigan State University's Collegiate Employment Research Institute, or CERI, which has been tracking college job placements for four decades.
That is encouraging news for young job seekers, given the sky-high 9.1 percent U.S. unemployment rate.
But experts caution against full-blown optimism. The opportunities are limited to a narrow range of service industry majors: accounting, finance, economics, marketing, human resources and information technology.
Students in other fields are not proving so lucky, with liberal arts majors faring worst.
"Most majors don't lead to a defined labor market outcome. Actually for about 70 percent of majors, we don't have a direct connection," said CERI director Phil Gardner.
A $10,000 DROP IN SALARY
Improvement has taken shape at the bottom of a deep employment hole left by the recession and economic uncertainty that continues to stifle any concrete sign of a broader jobs market recovery.
"Organizations are still tentative about hiring. So it's very competitive," said independent career counselor Dan King.
Employment gains for some graduates also mask a worrying problem of rising college dropout rates among students of low to moderate income. That phenomenon makes some analysts worry about the United States' ability to compete long term with global rivals like China and India.
Even graduates who do find jobs face diminishing returns, at least for people entering the work force for the first time with a four-year degree.
A bachelor's degree now fetches nearly $10,000 less than two years ago -- an average $36,800 versus $46,500 in 2009, according to a CERI survey of 4,600 employers.
Still worse are the graduates of the past two years who have failed to find the all-important entry level job in their chosen field, a loss that can take decades to overcome.
"It is very costly for young people to have trouble getting started on their careers," said Nobel laureate Peter Diamond, a Massachusetts Institute of Technology economics professor.
"You learn a lot on the job when you're young, both in literal skills and relationship to work," he said. "What you're taking away is that pattern of growth, and when they come in later, they don't adequately catch up."
Little wonder that 57 percent of Americans now say higher education fails to provide good value for the cost of schooling, according to a Pew Research Center poll.
A COSTLY MUST-HAVE CREDENTIAL
Since World War Two, a college degree has become the must-have job-seeking credential. Fall enrollments doubled to 20.4 million students in 2009, compared with where they stood in the mid-1970s, according to the U.S. Department of Education.
But the cost of obtaining a degree has skyrocketed even higher, with the so-called "sticker price" of tuition and fees more than tripling since 1980, to nearly $30,000 a year for students entering a private university in 2008.
Ballooning government deficits have since foisted higher tuitions and shrinking levels of financial aid onto state colleges and universities, where about three-quarters of American post-secondary students are enrolled.
To date, the average bachelor's recipient accumulates about $20,000 in debt and that is expected to rise.
Escalating costs are a main reason why about 40 percent of students at four-year colleges leave school before completing their degrees, analysts say.
The consequences are bound to be worst for students from low- to moderate-income families, who before the recession were already paying more than 25 percent of household income to send a child to a public college
Harvard English professor James Engell, who has studied the problems of higher education, says many middle-income students who drop out falsely believe that a college degree is not worth the cost and effort. As a result, they lose their shot at upward mobility and add to a widening U.S. income gap that threatens long-term U.S. competitiveness.
U.S. Census figures show that people with college degrees earned between $20,000 and $30,000 more than those with only high school diplomas in 2009. A Pew analysis shows that the typical college graduate earns about $550,000 more than the typical high school graduate over a 40-year working life, even with the costs of college factored in.
"Dangerously, higher education is becoming a reciprocating engine that reinforces the widening income gap in the United States," Engell said.
"It portends inequality and ultimately lack of democracy. It portends a society which is less democratic, less equal, less open to hard work and less open to opportunity."
(Additional reporting by Andrew Stern in Chicago; Editing by Doina Chiacu)