Race, Jobs and the Economy October 2023 Update
- Job growth continues to slow as the economy approaches the holiday season.
- The healthcare, government and construction sectors added a large number of jobs in October.
- With the Fed holding interest rates steady but mortgage rates remaining high, housing costs continued to rise albeit at a slower rate than in recent months.
The Bureau of Labor Statistics (BLS) monthly jobs report and the ADP National Employment Report provide a deep look into employment and income. The BLS October monthly report has unemployment at 3.5% for White workers, 5.8% for Black workers, 3.1% for Asian workers and 4.8% for Hispanic workers.
In this edition of our Race, Jobs and the Economy series, we give an overview of the most recent BLS employment situation and place the new October numbers in their proper context: inflation and housing cost trends, Federal Reserve policy decisions and the most consequential organized labor action in decades.
Analysis of Topline Figures in September BLS Report
The economy added roughly 150,000 jobs below the average of 258,000 for the past 12 months. October’s job creation fell short of the economist consensus that the economy would add 170,000 jobs. The overall unemployment rate was expected to remain unchanged, but inched up 0.1 percentage points to 3.9% in October.
Jobs & Sectoral Trends
The industries with the largest employment gains in October were healthcare (+58,000), government (51,000), construction (+23,000) and social assistance (+19,000). For consideration, the workforce in health care and social assistance is 78% women and 17% Black. On the other hand, about one in three construction workers are Hispanic, mainly being Hispanic men.
The ADP National Employment Report found that 113,000 private sector jobs, including 45,000 in Education and health services, were created in October. Chief Economist Nela Richardson noted “In all, October’s numbers paint a well-rounded jobs picture” and that the labor market has slowed over the year. These ADP numbers are in line with the BLS estimates unlike the previous report and further entrenched the idea of a general slowdown in jobs growth.
The largest sectoral decline in jobs came in manufacturing (-35,000). As alarming as this official statistic sounds, it is actually a mirage: Few if any of those 35,000 lost their jobs. The numerical blip is due to massive and successful strikes in the industry, especially the United Auto Workers (UAW) strike. A striking worker is officially counted as unemployed in BLS data if they are out on strike for the entire period being measured. The UAW recently came to a tentative agreement with the major three automakers to dramatically increase the wages earned by its 146,000 active members. The tentative agreements in place with General Motors, Ford and Stellantis will disproportionately help Black and Hispanic workers, who are 17% and 10% of all automotive workers. But new UAW contracts will have limited effect on the nation’s 21.2 million Black and 30.6 million Hispanic workers overall.
As we noted in our previous article in this series, policymakers should pay close attention in the coming months to sectoral trends in temporary help services, or workers on temporary contracts. When employers begin shedding these workers it may be an early recession warning indicator.
The number of temporary workers has declined since October of 2022, a worrisome trend that fortunately reversed in October as there were 7000 jobs added last month. A major decline occurred before the official start of the 2007 and 2001 recessions. According to BLS data, Black workers account for 23% of temporary workers, nearly double their share of the population, making the yearslong decline in temp hiring a potentially heavier burden for them.
The Labor Market
Because month-to-month changes are fairly unremarkable, it is helpful to look at unemployment trends over time. The overall unemployment rate has stayed below 4% for 21 straight months, indicating a strong job market for workers. The unemployment rate for most racial groups did not change very much from the previous month. The Black and Hispanic unemployment rates increased by 0.1 and 0.2 percentage points to 5.8% and 4.8%, respectively, meaning Black and Hispanic unemployment remain at record low levels. Those record lows, however, are still far above the White unemployment rate – 70% higher for Black workers and 40% higher for Hispanic workers.
Wages have risen 4.1% the past 12 months, slightly higher than the current inflation rate of 3.7%. Job-stayers experienced the slowest pace of wage growth since October 2021 at 5.7%.
The Federal Reserve, Full Employment and Inflation
The Federal Reserve has two mandates: maintain full employment and constrain inflation to its 2% target. The Fed has historically prioritized the latter over the former. The key Fed committee that sets monetary policy decided at its November meeting to keep rates steady at 5.25% to 5.5%. This was only the second month since early 2022 when the government has not raised the price of money. Fed officials cited economic indicators such as expanded business activity, strong job gains and a low unemployment rate as the main influences on their decision. Additionally, the productivity of US workers grew at 4.7%, the fastest rate since the third quarter of 2020, which ironically might prompt another hike in rates if the economy continues to expand in this way.
The Fed’s decisions have global consequences, but their most powerful and immediate effects are felt at home. The aggressive hikes that were recently paused have caused mortgage rates to skyrocket to a decades-long high of 7.86%. This has dampened demand from new homebuyers – yet despite shrinking demand, home prices have paradoxically climbed to new highs.
The latest Case-Shiller Home Price Index release revealed that national home prices have increased for the 6th month straight, with Chicago, New York and Detroit having the largest increases. These hardest-hit cities have large Black, Indigenous and people of color (BIPOC) populations. When both homes themselves and the loan capital required to buy them are ahistorically expensive, it becomes even harder to increase the homeownership rate for underserved communities.
Renters aren’t faring much better. While aggregated national statistics on rent price growth from Zillow showed a slowing rate of rent increases compared to recent trends, BIPOC-heavy cities mentioned above have some of the fastest-growing rental housing prices in the country. These less-White markets appear to be having a dramatically different experience to rental markets elsewhere: Apartment List’s latest National Rent Report and similar work from Realtor.com found that overall nationwide rent growth is actually negative, indicating apartments today are slightly less expensive than a year ago. But in many of the Blackest metro areas in the country – including Houston, Detroit, Milwaukee, Baltimore, Birmingham and St. Louis – rent has gone up over that same period.
These trends have yet to be fully reflected in the official consumer price index statistics on housing cost inflation (CPI-Shelter). There is a 12-month lag between when rent changes occur in the real world and when they become detectable in CPI data. However, the rate of increase in the CPI-Shelter component is already declining, from 8.84% last summer to 7.2% today.
While declining rents will be a godsend to new renters, most tenants are still paying high rents caused by the dramatic increases witnessed in 2021 and 2022 – especially in BIPOC-heavy cities where rents are still defying the positive national trend.
Conclusion
The labor market is not running as hot as last year, but neither is it cold. The BLS and ADP reports paint a nuanced picture of the current economic landscape. The Federal Reserve’s recent decision to maintain interest rates reflects a delicate balancing act between fostering full employment and managing inflation. Overall, these economic indicators underscore the complex dynamics at play in the current job market and broader economy – and underscore the intensity of the challenge to narrowing the racial wealth divide for African American and Hispanic households. A strong labor market and wages do a lot for basic economic stability but high interest rates and relatively high home purchase prices make substantive bridging of racial economic inequality unlikely in such an environment.
Joseph Dean is NCRC’s Racial Economic Junior Research Specialist.
Dedrick Asante-Muhammad is Chief of Policy, Research and Equity and NCRC.
Photo by Clem Onojeghuo on Unsplash.
