According to the latest Bureau of Labor Statistics (BLS) monthly jobs report, the U.S. economy added 372,000 jobs in June, while the unemployment rate remained unchanged from May, at 3.6%. Yet Black unemployment remains almost double the national rate (5.8%), and there are still 5.7 million people who are not in the labor force but who currently want a job, suggesting that the recovery has not fully pulled in workers at the margins.
In addition, COVID-19’s impact on the labor market is ongoing and complex. In June, 2.1 million people reported that they were unable to work because their employer closed or lost business due to the pandemic, and 1.4 million people missed a full week of work due to illness—the highest number since February.
In this blog, we highlight three important patterns affecting workers of color, including declines in labor force participation, uneven recoveries in the private and public sector, and growing cost burdens as prices increase. We also make recommendations for creating a resilient workforce with opportunities for workers at the margins.
The labor force participation rate is cooling disproportionately for Black workers
Almost as many people left the labor force in June (353,000) as new jobs were added to the economy (372,000), and the labor force participation rate dropped by 0.1 percentage points, from 62.3% to 62.2%. Men and women showed identical rates of decline (0.2 percentage points), while Black workers showed the greatest decline (0.8) followed by Asian American workers (0.5). White and Latino or Hispanic workers’ labor force participation rates remained the same, although the size of the white labor force declined.
This data suggests that Black and white workers left the labor force for different reasons. A large portion of white labor force exits were due to employed workers leaving the workforce; there were 137,000 fewer employed white workers and a 152,000 increase in white exits from the labor force. On the other hand, the loss of 166,000 employed Black workers does not fully explain the 291,000 Black exits from the labor force. The number of unemployed Black workers declined by 97,000, suggesting that these workers gave up their job searches due to discouragement and were not counted in the labor force. According to the BLS, there was a 14.9% increase in Black people who had not looked for employment in the previous four weeks but still desired a job.
According to the BLS, the number of workers aged 25 to 54 who left the labor force grew faster (at 2.7%) than those 55 years and over (1.1%). There was also a 4% increase in people with children under 18 that exited the labor force in June, suggesting that child care was an obstacle as school-aged dependents entered summer break. In addition, Black people with children under five were 12% more likely to have left or lost a job to care for their children, according to the Census Bureau’s Household Pulse Survey.
Another possible explanation for the overall drop in labor force participation is the impact of long Covid. Brookings analysis from earlier this year suggests that 15% of unfilled jobs could be traced to long Covid, which can have disproportionate effects on minority households due to structural inequities in health care access.
Private sector hiring is leaving out marginalized workers, while state and local government employment remains sluggish
There were 140,000 more private sector jobs in June 2022 than February 2020, demonstrating what President Joe Biden has hailed as one of the fastest job recoveries in recorded history. But the aggregate recovery masks important differences across industries. For example, employment in the leisure and hospitality industry is still down 1.3 million (7.8%) compared to February 2020, and the social assistance industry (including child care) is down 87,000 jobs (2%).
While overall Black employment in the private sector reflects U.S. demographics, a McKinsey report on race in the workplace shows they are often over-represented in frontline positions and underrepresented in managerial positions. With 20 hourly jobs for every salaried job, Black workers are left with limited opportunities for advancement in position or pay; they are 23% less likely to receive meaningful support to advance and 41% less likely to view promotions as fair.
Although the public sector was not hit nearly as hard as the private sector, the number of government jobs remains 2.9% below its pre-pandemic level (664,000 fewer jobs). This slow recovery is especially concerning for Black workers, for whom public sector employment has long been a source of economic security and mobility. In 2021, 16.9% of public workers were Black, compared to the national Black population share of 12.3%.
State and local governments have been especially slow to recover, employing 656,000 fewer people compared to February 2020. Two years ago, at the outset of the pandemic-triggered recession, Brookings researchers warned against repeating the mistake of failing to shore up state and local government employment during the Great Recession, when cutbacks disproportionately affected public sector workers of color as well as middle-wage and middle-skill jobs. While the federal response to the pandemic has been much more stimulative than in 2009, state and local employment rolls continue to lag, and some local economies have been hit harder than others.
As inflation increases, consumers are spending more on basic needs
Although Americans’ personal incomes increased by 0.5% in June, real disposable personal income decreased by 0.1% due to persistent inflation, which is currently 9.1% year-over-year, far outpacing the average wage growth of 5.1%. Thus, even though consumer spending increased by 0.2% in June, it was mostly driven by spending on housing and utilities, gasoline and other energy goods, international travel, and health care—all of which have seen rising costs.
The increased cost of rent is particularly concerning, as the end of the pandemic eviction moratorium has led to eviction filings rising above pre-pandemic rates in some cities. Prior Brookings research shows that renters in Black-majority neighborhoods face disproportionate rates of eviction, and research from the Washington Center for Equitable Growth shows that LGBTQ+ persons also experience disproportionate challenges in accessing affordable housing.
Amid growing economic uncertainty, it is time to create a more equitable and resilient workforce
As the labor market cools and inflation surges, many Americans are fearful of losing their jobs. Young adults are particularly vulnerable; a recent Brookings analysis revealed that good jobs are out of reach for many 20-somethings. “For large shares of young people (and disproportionately those who are female, Black, and Latino or Hispanic), we have normalized a path from high school to low-wage employment, unemployment, and poverty,” the authors wrote.
To strengthen labor force participation and create an equitable workforce, we need robust workforce preparation programs, including paid apprenticeships and work-based learning. Local and state governments can take the lead in some of this work, including by using American Rescue Plan Act and Infrastructure Investment and Jobs Act funds to create paid service corps that provide young talent with a pipeline into good jobs while also expanding public sector capacity. These government workforce initiatives can also ensure we have the capacity to implement green infrastructure and other climate priorities, and provide early- to mid-career workers with job security.