Rising unemployment doesn’t hit all parts of the labor force equally

Mitchell Hartman Sep 14, 2023
Heard on:
As the unemployment rises, it'll be important to keep an eye on how much more it rises for vulnerable groups, says Betsey Stevenson of the University of Michigan. Alex Edelman/AFP via Getty Images

Rising unemployment doesn’t hit all parts of the labor force equally

Mitchell Hartman Sep 14, 2023
Heard on:
As the unemployment rises, it'll be important to keep an eye on how much more it rises for vulnerable groups, says Betsey Stevenson of the University of Michigan. Alex Edelman/AFP via Getty Images

After hovering near five-decade lows of around 3.5% for most of 2023, the unemployment rate ticked up 0.3 percentage point in August to 3.8%, according to the Labor Department’s monthly jobs report.

On its own, that rise in unemployment isn’t necessarily alarming. More than 700,000 people joined the labor force in August looking for work, and not all of them found jobs right away. That pushed labor force participation up, which is good, but it also pushed unemployment higher, which is not so good, at least if it keeps going.

And here’s the thing: With interest rates high and the economy slowing, projections are that the unemployment rate will keep going up, reaching 4.7% by the end of 2024, according to the Congressional Budget Office. The Federal Reserve’s latest Summary of Economic Projections predicts a slightly lower peak in unemployment in the current cycle, with the rate rising to 4.5% in 2024.

So, no one is talking about getting to double-digit, Great Recession or early pandemic levels of unemployment this time around. But still, an increase of around 1% in the jobless rate would add approximately 1.6 million people to the ranks of the unemployed.

People like Bianca Buice. She’s 33, an African American union construction worker who was recently laid off from her job in Chicago, where she earned about $1,000 a week.

“Right now I’m doing Instacart,” Buice said from her car as she was made grocery deliveries. “I just filed for unemployment.”

She said the gig work is helping her make ends meet until her unemployment benefits come through.

“I need money now,” she said. “Not to say I can’t be patient, but I need gas, I got to eat tonight, I got to eat tomorrow.”

A moderate rise in unemployment, with more people looking for work, isn’t a big problem — assuming they find jobs eventually, said Betsey Stevenson, former chief economist at the Labor Department and now a professor at the University of Michigan. “As long as we have pretty short durations of unemployment, that’s just evidence of a dynamic labor market. That’s nothing to be worried about.”

Here’s what would worry her: a situation “where a large share of the population is unable to find work. Or they’re losing work, finding themselves unemployed because they’ve been laid off.”

Higher unemployment, and people taking longer to find work, would impact some groups more than others.

“There’s a pattern that has repeated itself several times in our most recent economic disruptions,” said Carl Van Horn, director of the John J. Heldrich Center for Workforce Development at Rutgers University. “People who are young, Black, Hispanic, Native Americans, women, people without a high school degree — these groups are the ones that tend to experience the greatest harm.”

Betsey Stevenson said that as headline unemployment (the U-3, or official rate, in the monthly jobs report) rises, it’ll be important to keep an eye on how much more it rises for vulnerable groups.

“An unemployment rate going up to 4.7%, you could be talking about a 9% unemployment rate for African Americans,” she said. “And it’s hard to understand why that’s ever necessary for any economy.”

Tulane University economist Gary Hoover noted that even in the widely touted strong labor market of the past couple years, with labor shortages widely reported, the unemployment rate for Black workers has remained stubbornly high, about double that of white workers. (In 2022, average unemployment for white workers was 3.2%; it was 6.1% for Black workers, according to Bureau of Labor Statistics data.)

“Let’s start with the premise that maybe the labor market never was as tight as we presumed, when we still had this very high unemployment rate from a group of workers who were able and willing and looking to enter into the workforce,” Hoover said.

“Is this systemic?” Hoover continued. “Will there never be an opportunity for parity in unemployment rates? That leaves me troubled.”

Disproportionate jobless rates will ripple through the larger economy, said Michele Evermore, a senior fellow at The Century Foundation and former Labor Department official who worked on unemployment insurance reform.

“Whenever unemployment increases, the first people to get pushed out of the job market are the most vulnerable,” Evermore said. “And they’re the ones that really need some serious assistance immediately because they don’t have much for savings. The purpose of unemployment insurance is as a counter-cyclical stabilizer for the community. So if you see some groups of people like Black workers becoming unemployed faster than white workers, and they can’t get unemployment insurance, that causes a spiral within their community.”

Evermore said that anyone who gets laid off now is likely to have a rougher time than they would have earlier in the pandemic or in recessions before that.

“We have many states with less than 12% of unemployed people able to access benefits,” Evermore said, adding that many states now offer less than 26 weeks of unemployment benefits, which used to be the standard nationwide. “And the replacement rate — or the amount of income replaced — continues to trend down. So you have states like Arizona where the maximum weekly benefit is $240.”

In Chicago, Bianca Buice was told she can expect $400 a week when her unemployment benefits kick in. That’s a bit lower than the second-quarter national average of $436 per week, and less than half of the $1,000 per week she was earning before she was laid off. 

Buice is optimistic she’ll return to construction work before too long. She said that with training in a skilled trade (she completed a construction pre-apprenticeship program with the Chicago-based nonprofit organization Revolution Workshop five years ago) and opportunities through membership in the Laborers Union, her prospects are better than in her previous job as an entry-level Amazon worker. 

“I’m not worried, because I have been through a lot in my life worse than this before,” Buice said. “At this point, I just keep it moving, keep my head up.”

In addition to picking up delivery gig work, Buice also recently started doing volunteer carpentry for Habitat for Humanity while she’s waiting for new construction work to become available.

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