In this edition of our Race, Jobs, and the Economy (RJE) series decoding each month’s Bureau of Labor Statistics (BLS) monthly jobs report, we overview the current state of the labor market.
The biggest labor market news of August was the massive downward revision of job gains in 2023. News of the revision caused stock prices to fall and placed greater scrutiny on the August jobs report.
Each year the job estimates are benchmarked to unemployment insurance records to align the survey with population totals. This year’s benchmark found that the private sector jobs gains were overstated by 818,000 jobs between March 2023 and March 2024. This revision, while 5 times as large as normal, is not surprising. As we reported in a previous update, the private sector lost jobs in Q3 2023.
Like this month’s jobs report, recent economic releases were mixed including the job opening and labor turnover report. The ratio of job openings to unemployed workers fell below its 2019 average, indicating an increasingly negative labor market for those seeking employment. Inflation slowed to a post-pandemic low of 2.5% in August. This is mixed news because categories important to households, such as shelter and transportation remain elevated.
Black Workers and Economic Trends
The economy going into the final stretch of 2024 is excellent by historical standards, especially for Black workers. The annual Black unemployment rate between 1972 to 2022 averaged 11.6%. In August it was 6.1%. The employment rate of prime-age Black workers (25- to 54-year-olds) remains at a historic high.
The overall sweetness of the economy masks the sour taste many households are experiencing as consumers. 37% of Black households reported having at least “some” difficulty paying for their usual expenses. Lingering high prices weigh heavily on Black consumers with over two-thirds concerned that prices will rise over the next 6 months. Finally, housing affordability remains a paramount challenge as over 21% of Black renters are behind on their rent payments.
As workers, Black people are typically the first to be fired and the last to be hired. As noted in the last RJE update, the Black male unemployment rate has been rising over the last several months. In August the trend reversed back down from 6.6% to 5.9%, bringing the overall rate down 0.2 percentage points to 6.1%. However, the Black male employment to population ratio dropped a whole percentage point, reversing gains made earlier in the year. An uptick in Black workers receiving pink slips may be an indication that a recession is imminent. It is too early to say definitively if Black unemployment is rising, a question that only this year’s remaining jobs reports can answer.
On top of elevated prices, high interest rates have made purchasing a home more difficult for many households. This is especially true for Black households, who are highly dependent on homes to build and maintain wealth. In fact, NCRC analysis found that home equity accounted for two-thirds of the wealth gains from 2019 to 2022. If mortgage rates remain elevated then hopes of boosting Black homeownership may not be achievable.
Economic Storms May Lie Ahead
Two kinds of notices regarding tornadoes are issued to the public. A tornado warning is issued whenever a tornado has been spotted by radar or storm chasers. A tornado watch is issued if a tornado is not present but conditions are favorable to producing them.
Like the weather, the economy develops extreme events of its own. Extended periods of relative calm can turn turbulent fast. Many have been asking: Is an economic storm coming? Are conditions favorable for a recession? Should one issue a sort of recession watch?
Some would say so and cite shaky consumer confidence as one sign of economic weakness. Consumption is the largest component of US GDP and the backbone of the US economy. When households expect economic conditions to worsen, many, especially low-income households, will reduce or cut certain discretionary spending. Additionally, they may delay large purchases or substitute premium products with less expensive goods.
Though the Conference Board’s consumer confidence survey found consumer confidence improved slightly, consumers are altering their spending habits. This has been echoed by business figures like Home Depot’s CEO who stated that consumers are delaying larger projects especially ones that require financing due to high borrowing costs. AirBnb reported that lead time, the time between when a reservation is made and the start of the trip, has been declining. This was received by analysts as a sign of souring consumer sentiment about the future, as they are less inclined to book trips far in advance.
As for household finances, the NY Fed’s quarterly report on household debt and credit found that credit card balances are at a record high and 48% higher than in Q1 of 2021. But delinquency rates have stabilized after rising in 2023, and the Fed states that much of the debt consumers hold is “high quality”. Additionally, their Labor Market Survey found that 4.4% of respondents expected to be unemployed within the next 4 months. 4% is not a large figure but it is the highest reading on record and a 36% increase from the previous quarter.
However, Americans are also holding on to credit card debt longer as 60% of cardholders reported carrying a balance for over a year, up from 50% in 2021. The combination of high inflation and high interest rates has eroded savings and made repayment more difficult. Because of this 17% of Americans state they are worried about being unable to pay the minimum monthly payment within the next six months.
Consumers are not the only ones bearish about the current and future state of the economy.
The Dallas Fed’s Texas Manufacturing Outlook Survey showed that Texas manufacturers remained bearish on business conditions and consumer demand. Textile product mills reported that uncertainty was high and “we are very unsure how the next quarter will go.” Chemical manufacturers reported increased turbulence in the market. It was a food manufacturer that provided the bluntest response: “We are preparing for the (emphasis mine) recession.” It appears some in the business community are prepared to issue a recession watch.
The August report will not assuage fears of a recession. Is there evidence that a recession is imminent? The short answer would be no- unemployment remains low and overall consumer spending remains robust. The picture is at best mixed. For example, manufacturing activity has been declining since March while the services industry has remained steady. This may explain the anxious comments made by Texas manufacturers.
All eyes are now on the Federal Reserve which is widely expected to announce an interest rate cut at its September meeting in response to these and other recent bits of economic news. A recession watch may be premature but a rate cut is not as the economy is increasingly in need of stimulus of some kind.
Joseph Dean is NCRC's Racial Economic Junior Research Specialist.
