A close look at recent increases in the black unemployment rate

Elise Gould

Elise Gould Senior Economist, EPI

Everything from weather to furloughs made it hard to draw any major conclusions from this month’s employment report, but one recent worrisome trend persisted—a continued increase in unemployment for black workers.

The Labor Department’s February employment report showed job growth effectively stalled last month, rising just 20,000. That was much lower than anticipated and substantially weaker than the prevailing trend of the last few years. The average over the last three months came in at a more solid 186,000, likely a better reflection of underlying trends, given the unusually harsh weather in February. At the same time, wages grew 3.4 percent over the year, the highest so far in the economic recovery from the Great Recession.

Turning to the separate household survey, the unemployment rate ticked down to 3.8 percent, while the labor force participation rate and the employment-to-population ratio (EPOP) held steady. The overall unemployment rate has sat at or below 4.0 percent for the last 12 months, averaging 3.9 percent over the year. The black unemployment rate, on the other hand, averaged 6.4 percent over the last year and has been increasing in recent months. For comparison, white unemployment tracked the drop in overall unemployment in February and has averaged 3.4 percent over the last year.

Given relatively small sample sizes and data volatility, I try to not to make a huge deal about any month-to-month trend. So, when the black unemployment rate started rising in December 2018, there was a good chance it was a blip. That so-called blip has happened for three months in a row. Black unemployment hit a low of 5.9 percent in this business cycle back in May 2018 and has exhibited relatively normal fluctuations in the ensuing months. It rose from 6.0 percent in November to 6.6 percent in December, then again to 6.8 percent in January and 7.0 percent in February. The black unemployment rate hasn’t been above 7.0 percent in over a year. Because of the volatility and concerns about monthly data reliability, the figure below smooths out the black and white unemployment rates, graphing both the monthly data (in light blue and green, respectively) as well as a three-month moving average (in dark blue and green, respectively). The three-month moving average is in a darker shade because that’s what I think is the underlying trend and what we should focus on.

Over the last three months, black unemployment averaged 6.8 percent, up from 6.1 percent the prior three months. This significant uptick is concerning. It does appear that the labor force participation rate ticked up slightly between the prior three months and the most recent three months (62.3 percent to 62.5 percent). Taken on its own, this is a sign that black workers may be (re)entering the labor force in the hopes of finding jobs. But, at the same time, the black employment-to-population ratio fell twice as far over the same comparison period. The black EPOP averaged 58.2 percent the last three months, down from 58.6 percent the prior three months.

The rise in black unemployment did not happen at a time when white unemployment also increased sharply. Over the last three months, white unemployment averaged 3.4 percent, exactly half as much as the black unemployment rate (6.8 percent), and only ticked up slightly over the previous three months (from 3.3 percent). As the economy continues to move towards full employment we would expect there to be some closing of the black–white unemployment gap, so the recent trend is troubling.

We cannot definitively say this is a trend that is going to continue, but it is certainly an indicator to watch in coming months. That’s especially true given widening wage gaps between black and white workers in recent years.


Reposted from EPI

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