U.S. employers added 481,000 new jobs in January and 678,000 new jobs in February—an impressive feat given that many economists projected record-high job losses based on leading indicators such as the three-month high in initial jobless claims. Unemployment receded for the second consecutive month, inching down from 4% in January to a pandemic low of 3.8% in February. And last week, the Bureau of Labor Statistics (BLS) reported that as of the end of January, there were 11.3 million job openings.
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But these blockbuster economic headlines are disguising considerable weakness in certain segments of the labor market. Native Americans have the highest unemployment rate among all race groups (11.1% in January and 7.4% in February) owing in part to their overrepresentation in frontline service sectors. Meanwhile, the rosy Asian American unemployment outlook (3.7% in January and 2.9% in February) obscures a steady slide in the labor force participation rate for Asian American workers, which dropped from a peak of 65.2% in November to 62.9% in February.
The disconnect between the official unemployment rate and the true health of the labor market is not a new debate. Failing to draw on more comprehensive jobless measures promotes false optimism about the recovery and detracts from the fact that vulnerable groups are still deeply mired in recession. For instance, the Black unemployment rate slipped to 6.6% in February, but applying a different comparative yardstick to Black employment reveals a troubling contradiction. While the headline unemployment rate captures jobless people actively searching for work within a specified time frame (typically four weeks), it does not count the marginally attached labor force and part-time workers. The underemployment rate—a more comprehensive metric—accounts for a broader state of joblessness, including people with longer search times, those periodically searching for work, and individuals employed part time for economic reasons.
Figure 1 shows the Black unemployment rate tracking uncomfortably closer to the underemployment rate than the headline unemployment rate. February’s underemployment rate stood at 7.2%—almost double the official unemployment rate.
Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell have raised concerns about the inadequacy of the headline rate in capturing the full dynamics of unemployment. Underestimating the scale of unemployment obscures the economic pain of marginalized people and leads policymakers to overlook policies that could reduce the time between someone voluntarily leaving a job and finding a new one. Increasing employment stability for high turnover groups requires a precise understanding of the noneconomic and financial barriers to their labor force participation, particularly for working women with caretaking responsibilities.
To accomplish this, Brookings Metro partnered with SaverLife, a nonprofit savings membership program, to better understand the job market experiences of women of color and other economically vulnerable job seekers(i). We collected more than 1,500 survey responses from a random sample of SaverLife’s members between January and February. By design, the survey overrepresents SaverLife’s membership, which mostly consists of women, people of color, and those earning less than $50,000 annually.
Despite more jobs and higher satisfaction, labor weaknesses remain
The recent growth in new jobs includes jobs at the bottom of the income distribution. This is a marked improvement over past recessions, which have often left low-income workers behind. As shown in Figure 2, 63% of survey respondents said they’re working either full time or part time.
Covid-induced labor supply disruptions pushed employers to respond to workers’ needs for higher-quality jobs by raising wages and boosting benefits with more robust paid leave policies or flexible work arrangements. Nominal wages increased by 5.1% in February; encouragingly, these increases have filtered down to low-paying sectors such as leisure and hospitality, where wages grew by 11.2% and outpaced inflation. Long-overdue income increases and flexible work have inspired worker confidence and spurred tremendous job switching in low-wage sectors. Job satisfaction was remarkably high among full-time workers, even those earning less than $15 per hour: 70% said they were satisfied with their pay and benefits.
Despite this good news, the survey revealed considerably weaker labor dynamics in vulnerable segments of the labor force. Of the respondents, 19.4% were working part time or fewer hours than they’d like, and 23.7% were unemployed and searching for work. More than one in 10 respondents (11.9%) said they were unemployed and had been actively searching for work for up to two months. The timing distinction matters here because the BLS does not include individuals who continue to search for work outside of the four-week time window—a major source of the disconnect we observed between headline unemployment and apparent slack among low-income job seekers earnestly searching for months. The top job market concerns for unemployed respondents searching for work included not enough flexibility for dependent care (38%), unsafe environment with COVID-19 (32%), and low pay (26%).
For several reasons, including small sample sizes, we were unable to produce reliable estimates by race and gender for our survey. But given the trends discussed above, it’s hard to imagine a scenario where these higher unemployment estimates don’t disproportionately impact women of color. Moreover, these estimates are an important reminder that topline unemployment numbers can substantially undercount the number of people who lack a job but desire one.
Barriers to thriving employment
What keeps working families continuing the search for better jobs? Our survey identified several factors, including employer decisions to reduce hours, personal illness, and issues related to child care and scheduling.
In our survey, involuntary part-time work was especially concentrated among female respondents, who were more likely to report accessible and affordable child care among their primary concerns about the job market. Our survey found that 23% of part-time workers indicated that child care hindered their pursuit of jobs with more hours, while 13% cited lack of skills. But the vast majority (69%) of respondents said their primary barrier to working additional hours was their current job limiting their hours—suggesting that employers restricted their hours to part time even though they preferred to work more. The ongoing pandemic is one major contributor to employer’s limiting hours: According to the February jobs report, 4.2 million people reported working fewer hours or not working at all because their employers continued to experience Covid-related disruptions.
In other words, employers have adopted part-time work as a cost management strategy in light of rising business costs due to inflation and supply chain disruptions. This observation fits with a recent New York Times article exploring challenges confronting frontline workers: Despite the tight labor market, many firms are seeking opportunities to cut costs through just-in-time scheduling (which allows for a leaner workforce) and through reducing hours to avoid paying for benefits.
On March 16, Federal Reserve Chairman Powell announced an interest rate hike of 0.25%, and signaled that the Fed would incrementally raise rates at each of its next six monthly meetings. This is the first rate hike since December 2018, and while financial markets and large corporate employers have already priced the expected increase into capital decisions, smaller employers are likely to price the policy move into their workforce decisions. Higher rates will temper hiring and cool wage growth, but it could also increase employers’ dependence on part-time workers and schedule manipulation to maintain razor-thin profit margins.
For roughly two in five job seekers in our survey, fear of contracting COVID-19 is top of mind. January saw 3.6 million people miss a full week of work due to illness or medical reasons, and an additional 4.3 million full-time workers worked part-time hours for the same reason.
Among the unemployed, child care worries centered on structural mismatches between their needs and available job schedules. Nearly two out of five respondents (38%) said work schedules didn’t accommodate their dependent care obligations. According to the BLS, 72,000 workers missed a full week of work due to child care issues in January, and 44,000 missed a full week in February. An additional 196,000 workers were forced to work part time due to child care disruptions in January, with that number falling to 97,000 in February.
A steep rise in daycare costs cements childcare as a structural barrier for job seekers with child-rearing responsibilities. According to UrbanSitter, babysitting fees increased 11% in 2021 to an average of $20.57 per hour. These prices will stay elevated unless policy interventions target affordability and increase supply.
However, a singular focus on care and access diminishes the complexity of the family care puzzle. One survey respondent said, “I was working at home for [my employer], so I didn’t have to pay for child care. But when [my employer] said I had to go back to work in July 2021, I had to put my child back in daycare and the hours didn’t work for me. I worked from 12:30pm to 9pm and daycares closed at 6pm.” This type of scheduling mismatch is a critical dimension of the child care conversation that disproportionately impacts working women of color struggling to balance work and care. Notably, men also shared this concern, with 15% of those surveyed who were working part time or fewer hours than they’d like responding that child care availability or affordability were the main reasons for working less than they wanted to.
Numerous studies have documented the precariousness of irregular schedules on economically vulnerable families—beyond dependent care, scheduling irregularities were associated with hunger hardship and behavioral problems in children. Employers must address these scheduling concerns, especially for parents with school-aged children with few affordable after-school care options.
Supporting the workforce through smart policies
The February jobs report, in conjunction with our real-time survey, suggests employers have yet to tap into a hidden labor force: involuntary part-time workers and the unemployed searching for work but facing scheduling and family care constraints. To attract these workers, employers must embrace more inclusive models of family leave without forcing workers to trade well-being for pay.
Paid family leave can offer job protection for working families and women of color, who are more likely to take unpaid leave due to illness or family care. At the federal level, Sen. Kirsten Gillibrand’s (D-N.Y.) proposed FAMILY Act would provide paid medical and family leave to all employees. This paid leave would be formula-based, funded through a tax levied on employers, employees, and self-employed individuals, and coordinated with state and local leave and disability policy. Similarly, Sen. Patty Murray’s (D-Wash.) Healthy Families Act would require “employers with 15 or more employees to provide their employees with at least one hour of earned paid sick leave for every 30 hours worked, up to a maximum of 56 hours of paid sick leave in a year.”
In addition to federal efforts, nine states and Washington, D.C. have enacted state-level paid family leave policies. Washington, D.C.’s paid leave law is 100% employer-funded and covers all private employers.
It sets a progressive wage replacement plan to protect families from income volatility. Eligible workers who earn below 150% of the city’s prevailing minimum wage threshold have 90% of their wages replaced, while the replacement rate for workers who earn above the income cliff is 50%. The city’s newly proposed Universal Paid Leave Portability Amendment Act of 2022 extends the benefit to workers who have lost their jobs; passing this law would create a portable family care model that other states can replicate.
To address issues associated with child care, policymakers should consider legislation such as Sen. Murray and Rep. Bobby Scott’s (D-Va.) Child Care for Working Families Act, which has over 60 co-sponsors in the House and Senate. The act would subsidize child care and early learning programs for low- to moderate-income families, expand the number of child care locations, and boost pay for child care workers.
Policymakers must also address scheduling practices that prevent parents from managing their family care needs. In February, Sen. Elizabeth Warren (D-Mass.) and Rep. Rosa DeLauro (D-Conn.) reintroduced the Schedules That Work Act, which would require employers to provide work schedules to employees at least two weeks in advance, and pay extra compensation when requiring employees to work difficult shifts such as split shifts over nonconsecutive hours.
Combating the obstacles of insufficient paid leave, unaffordable child care, and irregular scheduling will broaden the scope of the nation’s economic growth and support the full potential of all workers. Too many working families continue to face barriers that hinder their full participation in the labor force, making our economic recovery weaker than it initially appears. Coaxing these workers to join the workforce in some capacity comes down to coordinating private and public labor policies that improve job quality, boost worker productivity, and ensure the well-being of the workforce.
i. The data was collected via SaverLife’s member portal using a poll feature of Lucky Orange, a website analytics company. Every member visiting the website had a one-in-three chance of being asked to participate in the survey. A random sample of 10,003 members were asked, of which 4,400 responded. However, due to the early detection of fraudulent activity, we ended up with a total of 1,514 non-fraudulent responses across 144 metropolitan areas.
This post was produced through a partnership between Brookings Metro and the NAACP Empowerment Programs.