Black workers led the United States back to work after the Covid crisis, but economists warn that their gains will reverse as the Federal Reserve tries to cool the economy with aggressive interest rates.
Earlier this year, rising wages and a shortage of workers pushed black workers into the labor market in record numbers. Black Americans sought work at higher rates than white Americans in May for the first time since 1972, according to Labor Department data. Employers have reduced job requirements, expanded skills programs and diversified their hiring plans to fill their ranks amid staff shortages, providing new opportunities for incumbent workers in the process.
While unemployment and labor force participation rates for workers of color have remained stable in recent months, rising interest rates and a worsening job market could reverse those gains. In recent months, employment has already fallen in many industries that disproportionately employ workers of color, including retail, transportation and warehousing.
Between September and November, general merchandise stores, including department stores, lost 71,500 jobs, and the warehouse and storage industry lost 41,000 jobs. Many of these industries rely on low-wage workers, whose average annual wages are typically $30,000-$50,000 in retail and warehousing.
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William Spriggs, professor of economics at Howard University and chief economist for the AFL-CIO union, said that “when companies go out of business . . . the unemployment rate goes up because the unemployed can’t get out of unemployment. And that hurts first.” gives to black workers.”
Spriggs added that “the big rebound in black labor force participation, which has really helped black workers in the last six months . . . is going.”
Fears of the US economy heading for a recession have grown as the Fed moved ahead with its toughest set of interest rate hikes since the early 1980s. In an effort to tackle decades of inflation, the central bank has raised its benchmark policy rate from near zero in March to 4.5 percent in less than a year. A further rate hike is expected next year, with top officials forecasting the federal funds rate to reach 5.1 percent.
Policymakers believe there is a way to get inflation back to the Fed’s 2 percent target without major job losses and a recession — a claim many economists across Wall Street and academia dispute. A recent survey conducted by the Financial Times in collaboration with the University of Chicago’s Booth School of Business found that a large majority of leading economists expect a recession next year, which they warn could push the unemployment rate to 5 percent. .5 to exceed the current 3.7 percent. cent.
Most Fed officials now expect the unemployment rate to rise by about 1 percentage point next year to 4.6 percent and remain at that level through the end of 2024.
Economists and politicians agree that people of color suffer disproportionately when the unemployment rate rises, especially when there is a recession, even a mild one.
“Black Americans have never had less unemployment,” says Algernon Austin, director of race and economic justice at the Center for Economic and Policy Research, a Washington-based think tank. “The unemployment rate ranges from high to very high to very high.”
“It’s important to note that a mild recession means going from high unemployment to very high unemployment for black people.”
Before the pandemic — when the U.S. labor market was in good health — the unemployment rate for black Americans was roughly twice that of white and Asian adults. In 2019, it stood at 6.1 percent, compared to 3.3 percent and 2.7 percent for white and Asian adults, respectively. For Hispanic adults, it was 4.3 percent.
At the worst of the Covid economic crisis, the black unemployment rate rose to 17 percent. For white workers, it was slightly lower, 14 percent.
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Fed officials stressed that inflation is also hurting those communities the most, and they must bring prices back under control to restore a healthy economy. Sooner or later, they argue, because the central bank will have to tighten the brakes on the economy.
“Without price stability, the economy doesn’t work for anybody,” Jay Powell, Fed chairman, said in mid-December at his final press conference of the year. “We will not achieve a sustained period of strong labor market conditions that benefit all.”
Austin expressed concerns about other factors, such as the war in Ukraine and China’s Covid policy, which are outside the Fed’s control, but have a major impact on the trajectory of inflation. He warned that the central bank was not only “unnecessarily” imposing costs on the most economically vulnerable people, it was also reducing their ability to deal with the price pressures they were already struggling to cope with.
“[Put] people are unemployed, then they will not be able to cope with inflation.”
