The labor market continues to show strengths not seen in decades, with unemployment rates below the 4% threshold defined as “full employment” for the past two years. This strong labor market has shrunk the historic racial disparities in topline jobless rates. The African American unemployment rate is now roughly 1.5 times that of Whites, down from a long-term trend of roughly doubling the White unemployment rate.
The Bureau of Labor Statistics (BLS) monthly jobs report and the ADP National Employment Report provide a deep look into employment and income. The December BLS report has the unemployment rate at 3.5% for White workers, 5.2% for Black workers, 3.1% for Asian workers and 5.0% for Hispanic workers.
In this edition of our Race, Jobs and the Economy series, we overview the most recent BLS and ADP jobs numbers alongside inflation data, and preview our upcoming work on Black wealth.
Analysis of Topline Figures in January BLS Report
The economy added 216,000 jobs in December, slightly below the 2023 average of 225,000 per month but smashing the consensus prediction of 158,000. Unemployment stayed unchanged at 3.7% in December.
The 0.6% reduction in the Black unemployment rate was the largest monthly drop in 2023 and is entirely attributed to Black men whose rate declined from 6.3% to 4.6%. It is also tied with last April’s 4.6% as the lowest rate on record. This massive drop is due to the large numbers of Black men going from unemployed to employed – two statistical statuses tied only to those who are actively seeking work. The jump shows up in the broader employment-to-population ratio as well, which for Black men jumped from 64.9% to 66% in December. Industries that employ large numbers of Black workers had differing job growth in December: Public-sector employment rose while the trade and transportation sector shed jobs. Future reports can help determine if this observation is a peculiarity or a trend that will persist throughout 2024.
Jobs & Sectoral Trends
The industries with the largest employment gains were: government (+52,000), leisure and hospitality (+40,000), healthcare (+38,000), and social assistance (+21,000). While retail trade added 17,000 jobs, department stores lost 13,000 jobs, indicating that retailers scaled back this holiday season. On this latter point, the growth of holiday spending was slower than usual but still strong. There was a large increase in online shopping which can take away foot traffic and may explain the slow department store hiring.
The report notes that unlike other major sectors, leisure and hospitality is still 1% below its pre-pandemic level. This is a concern because the industry is one of the largest in the economy and a major employer of women. The sector’s lag helps explain why the economy fell short of the nearly 400,000 overall monthly jobs average witnessed in 2022.
December was one of the rare months where the ADP report and BLS report came to similar conclusions. ADP reported 164,000 private sector jobs were created in December with similar industry gains compared to BLS. Chief Economist Nela Richardson noted that the labor market was returning to pre-pandemic hiring trends.
Slowing Inflation
One positive trend in 2023 was the decline in inflation. From its peak in June 2022, inflation went from over 7% in November 2022 to 3.1% a year later. Goods, especially food and energy, declined dramatically in their contribution to consumer price index (CPI) over the year. Housing also played a notable and major role in CPI trends. Housing inflation at times accounted for 90% of monthly inflation changes in 2023. Housing inflation is expected to subside over 2024, as BLS data is known to lag by a year or so. However, prices will remain sticky for some time. The raw cost of housing for both renters and owners is unlikely to drop, but rather they will stop increasing at the pace we have seen.
2023 also saw the highest mortgage rate in decades at 7.1% in October, down to 6.76% today. Similarly, median existing home prices peaked in 2023 at $410,000 in June. This combination of elevated mortgage rates and prices caused the National Association of Realtors’ housing affordability index to record its lowest level since 2020, indicating it is more difficult for new homebuyers now than before the pandemic.
Black Wages
Median weekly wages for Black workers increased in Q3 by $37, or 4.2%. The median Black worker is now paid $918 per week. White workers’ wages rose by $36 per week, a 3.3% increase to $1,137.
Given the 2022 inflationary episode and its continuing fallout, real wages increased by only 0.8% in November year-over-year. Because inflation was 3.1% in November, Black workers barely beat inflation last year and like all groups continue to be negatively affected by inflation pressures. Q4 wages will be released later this month and should provide a window into wage growth for the entire year of 2023.
Conclusion
Today’s job report provided some pleasant news, including the smashing of jobs growth expectations, strong growth in several key sectors and the lowest Black male unemployment rate ever recorded. Both adult Black males at 4.6% and adult Black women at 4.8% are approaching economists’ definition of “full employment.” The policy challenge for 2024 is to both maintain and improve these numbers so that the African American community for the first time can be at the 4% full employment threshold and end the employment disparity with White Americans.
The fluctuations in inflation, the expense of the housing market and the ongoing income inequality are some of the challenges facing the African American household. Inflation, unaffordable housing and income inequality are challenges to not only African Americans but the economy as a whole and should be at the forefront of election-year policy discussions.
Looking forward, the upcoming data on Q4 wages and further analysis of Black wealth will be crucial in understanding the real impact of these economic shifts on different communities. As we continue to navigate these complex economic waters, our focus remains on unraveling these trends to foster a more equitable and robust economic landscape for all.
Joseph Dean is NCRC's Racial Economic Junior Research Specialist.
Dedrick Asante-Muhammad is NCRC's Chief of Policy, Research and Equity.
