Economists specializing in employment trends amid the recovery from the COVID-19 pandemic have noted significant gains for Black, Hispanic, and less-educated workers, challenging historical patterns. However, as the demand for workers stabilizes, concerns arise about a potential return to conventional disparities in joblessness, with the burden falling disproportionately on these same groups.
William M. Rodgers III, the Vice President and Director of the Institute for Economic Equity at the St. Louis Federal Reserve, expressed cautious optimism tempered by emerging concerns. Following a half-percentage-point increase in the unemployment rate from the record-low 3.4% in April, Rodgers highlighted a developing worry about the potential shift in employment dynamics.
Speaking at a recent Boston Fed labor market conference, Rodgers noted that, during the current “tight labor market recovery period” since March 2022, less advantaged groups have retained employment gains made during the pandemic recovery. The employment-to-population ratios for Black men, Black women, and those aged 25 and over without a high school diploma have remained higher than pre-pandemic levels.
However, Rodgers flagged a concerning trend for younger workers, particularly young Blacks not enrolled in school, where job outcomes have started to worsen. This raises questions about the sustainability of benefits provided by the current labor market dynamics for marginalized groups.
Economist Torsten Slok from Apollo Global Management echoed these concerns, emphasizing the noteworthy jump in the unemployment rate for 16- to 19-year-olds from 9.2% in April to 13.2% in October, signaling potential broader labor market weakness.
The Federal Reserve, responding to a 40-year high in inflation, aggressively raised interest rates from March 2022 through July. Fed Chair Jerome Powell aimed for a return to pre-pandemic economic conditions, emphasizing the importance of maintaining employment gains alongside inflation control.
Recent data from the JPMorgan Chase Institute revealed that median income gains for Blacks and Hispanics outpaced inflation, while whites and Asians experienced a slight decrease in inflation-adjusted incomes. Despite inflation, the bottom pay quartile saw median real income gains of 6% since 2019.
Chris Wheat, president of the JPMorgan Chase Institute, attributed the difference to changes in occupational and wage structures during the pandemic and increased bargaining power for workers.
However, as the U.S. faces a potential slowdown in inflation, questions arise about whether the recent economic policies have achieved a “soft landing.” Cecilia Rouse, former head of the Council of Economic Advisers and incoming president of the Brookings Institution, acknowledged the remarkably equitable recovery so far but expressed concern about potential setbacks in the coming months.
The gap between the unemployment rates for whites and Blacks, which narrowed to a record-low of 1.6 percentage points in April, has since widened to 2.3 points. Rouse emphasized the importance of pandemic-era safety nets and the tight job market in providing support but warned of potential challenges ahead.
“Will this last and what’s to come?” Rouse questioned, noting a perceptible loss of ground already visible in recent trends. The next few months will be crucial in determining the longevity of the current equitable labor market recovery.
In the quest for a resilient and inclusive economic recovery, vigilance and proactive measures are imperative to avert the potential return to conventional disparities in joblessness, ensuring a more equitable future for all.
Source: Reuters
