Jobs report doesn’t show signs of recession—yet—as labor market remains strong: The Fed should still be wary of raising interest rates much further
Below, EPI economists offer their initial insights on the jobs report released this morning, which showed 528,000 jobs added in July.
- An international comparison among OECD countries shows that rising inflation is a global phenomenon, not unique to the United States.
- This fact argues strongly that high inflation in the U.S. has not been driven by any unique American policy—not the American Rescue Plan and other generous fiscal relief during the pandemic recession and recovery nor anything else U.S.-centric.
- Some have argued that the global rise of inflation means that many countries— including the U.S.—overstimulated their economies and generated excess aggregate demand. But this explanation is not supported by the data. The countries with larger declines in unemployment over the past 18 months have not seen larger inflation spikes.
Consumer price data for June 2022 showed another month of rapid inflation, with overall inflation rising 9.1% year-over-year and core inflation (which doesn’t include volatile energy and food prices) rising by 5.9%. This level of inflation has obviously become a major political issue this year. But however this issue resonates politically, as an economic matter a common narrative that blames the Biden administration and its policy choices for causing the inflation is deeply misleading.
This is not simply a case for exonerating the Biden administration’s choices—how the recent inflationary outbreak is interpreted will have huge consequences for how policymakers respond. A loud chorus of economic analysts and influential policymakers continue highlighting the need for the Federal Reserve to continue raising interest rates sharply to slow growth to “rein in” inflation. This approach risks terrible consequences and threatens to cast aside the amazing policy achievement of a full jobs recovery from the pandemic recession.
On Friday, the Bureau of Labor Statistics (BLS) will release its monthly report on the state of the labor market. In addition to top-line payroll employment growth and changes in labor force participation, probably the most anticipated measure is the pace of nominal wage growth.
Even with the recent contraction in gross domestic product (GDP), the labor market has been expanding at a steady rate and wage growth continues to fall short of inflation. Despite this, many remain worried that abnormally high nominal wage growth (relative to pre-pandemic) will prevent inflation from returning to more-normal levels in the year ahead. In this jobs day preview post, we take a closer look at wage growth using several different measures to gauge just how worried we should be that wage growth will not normalize in the coming year without aggressive policy measures that cause collateral damage (like higher unemployment) in the labor market. We find that most of these measures show decelerating wage growth in very recent quarters.
Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for June. Read the full Twitter thread here.
Slight correction. Job openings are down each month since March’s series high. That’s three months in a row of declines. Please pardon the error in counting months when it’s now August and the data are for June.
— Elise Gould (@eliselgould) August 2, 2022
Yesterday’s data showing negative gross domestic product (GDP) growth for the second consecutive quarter has sparked a debate about whether the U.S. economy is in recession. Below are some quick thoughts interpreting the numbers, and some larger questions about recession and inflation.
- We’re very likely not in recession currently, even though we’ve had two straight quarters of negative GDP growth. The “two straight quarters” criterion for a recession is a rough rule of thumb. The more generally accepted arbiter of business cycles in the U.S. is the National Bureau of Economic Research Business Cycle Dating Committee, which weighs changes in many economic variables to determine the start and end dates of recessions. The most notable statistics arguing against the view that we’re in recession currently are unemployment and employment growth. Both remain quite strong.
- The negative growth in the first quarter of 2022 was mostly driven by statistical quirks that hid some real strength in the economy. Specifically, exports were quite weak and imports quite strong, but both of these measures can be pretty volatile. Net exports in the second quarter, for example, were positive and added to growth. But, if I had to choose one measure of the strength of the domestic economy that stripped out volatile measures that could be introducing noise in our assessment, I’d choose domestic demand growth (known officially as final sales to domestic purchasers)—this is a measure of spending by U.S.-based households, businesses, and governments that strips out volatile changes in firms’ inventories. In the first quarter, this domestic demand growth was acceptably strong, rising at a 2.0% rate.
- Conversely, fundamental growth in the second quarter was weak. Domestic demand growth actually shrank in the quarter. On top of that fundamental weakness, a statistical quirk—a huge decline in the contribution to GDP made by changes in firms’ inventories—also weighed unusually on growth.
- In short, the negative growth in the first quarter of 2022 looked much worse than it was. This is far less true for the negative growth in the second quarter.
In a new EPI technical paper, I review data on how union workers fared relative to their nonunion counterparts during the first two years of the COVID-19 pandemic. The nationally representative data allow me to draw several important conclusions about what unions have been able to do for the workers they represent as the country confronts COVID-19.
First, unions helped maintain pay for workers. Specifically, union workers—union members and nonmembers who were covered by a collective bargaining contract—were more likely than nonunion workers to receive pay during periods when their workplaces were not open for business. Even after controlling for a wide range of worker characteristics, such as industry, occupation, education, age, gender, race and ethnicity, marital status, state of residence, and others, union workers were 10 percentage-points more likely than nonunion workers to have been paid by their employers for hours not worked due to pandemic-related closures or lost business during the pandemic period.
Second, unions saved jobs. My estimates suggest job losses were 2,000 jobs per month lower for union members than nonunion members during the first six months of the pandemic when the economy was suffering most. Even as the economy started to recover over the subsequent 16 months, unions continued to preserve an average of 1,700 jobs per month. During the 22 months I analyzed in my paper, unions saved just over 40,000 jobs, relative to what happened to workers in nonunion establishments.
Third, the union boost to wage levels remained. The union weekly earnings premium—the 7% by which the weekly earnings of union workers exceeded the earnings of comparable nonunion workers—held steady over the course of the pandemic. The pandemic hit all workers hard, but it did not reduce the relative position of union workers.
Additional findings and a complete discussion of the methodology used are available here.
Minnesota set a record in June with an unemployment rate of 1.8%, the lowest number recorded for any state ever since the data began to be collected in 1976. While this is good news, the headline unemployment number must be put in proper context. In Minnesota, and across the country, payroll employment and labor force participation are still down considerably from before the pandemic. Policymakers should resist the temptation to treat a low unemployment rate as proof the economy is overheating, and instead should continue pursuing policies to bring workers into the workforce, raise wages, reduce barriers to employment, and promote racial and gender equity.
The unemployment rate is an important measure, but it doesn’t tell the full story
A 1.8% unemployment rate means that only 1.8% of Minnesotans looking for jobs report that they’re unable to find one. That’s good news. And it’s not just Minnesota that’s doing well. The June 2022 unemployment numbers also showed Nebraska at 1.9% unemployment, New Hampshire and Utah at 2.0%, and Vermont at 2.2%. Eighteen states, in total, had a June unemployment rate below 3%.
And yet, every single one of these states still had fewer jobs in June than before the pandemic. EPI’s Economic Indicators page shows that the United States is still down 524,000 jobs from its pre-pandemic peak. If we account for population growth over the last 2.5 years, the country has 3 million fewer jobs than we would expect if pre-pandemic trends had continued.
In recent months, a number of policymakers have cited inflation concerns as the source of their opposition to budget reconciliation proposals that would raise taxes progressively and boost federal spending on public investments and social insurance. (Many of these proposals were once collected together and named the Build Back Better Act (BBBA), but since negotiations over the full BBBA faltered there has been no single name for the shifting permutations of tax and spending changes that are under debate.)
Today’s inflation is a real concern—it is running too high and is reducing households’ purchasing power. But linking fiscal policy decisions about the proper level of taxes and spending in the medium and long run to today’s inflation makes little sense. Even worse, many of these policymakers cast both the tax increases and the spending increases as potentially inflationary. This is not just unwise—it is simply economically innumerate.
The value of the federal minimum wage has reached its lowest point in 66 years, according to an EPI analysis of recently released Consumer Price Index (CPI) data. Accounting for price increases in June, the current federal minimum wage of $7.25 per hour is now worth less than at any point since February 1956. At that time, the federal minimum wage was 75 cents per hour, or $7.19 in June 2022 dollars.
Last July marked the longest period without a minimum wage increase since Congress established the federal minimum wage in 1938, and continued inaction on the federal minimum wage over the past year has only further eroded the minimum wage’s value. As shown in Figure A, a worker paid the current $7.25 federal minimum wage earns 27.4% less in inflation-adjusted terms than what their counterpart was paid in July 2009 when the minimum wage was last increased, and 40.2% less than a minimum wage worker in February 1968, the historical high point of the minimum wage’s value.
The minimum wage increases of the late 1960s expanded the coverage of the minimum wage to include industries like agriculture, nursing homes, restaurants, and other service industries. The earlier exemption of these industries from the federal minimum wage disproportionately excluded Black workers from this important labor protection. The application of the minimum wage to these industries raised workers’ incomes and directly reduced Black-white earnings inequality. Congress’s failure to raise the minimum on a regular basis in the interim, however, has eroded the value of the federal minimum wage and worsened racial earnings gaps.
Rising housing costs have made housing largely inaccessible and unaffordable to most Americans, but have acutely impacted communities of color and low- to moderate-income families over the past several decades. The median asking rent in the United States rose above $2,000 for the first time in June 2022. Given that the U.S. Department of Housing and Urban Development (HUD) sets the standard of affordability at 30% of household income, $2,000 per month would only be “affordable” for households earning at least $80,000 per year—well above the median U.S. household income ($67,521).
A growing housing supply shortage is a key contributor to the housing affordability crisis. Following the Great Recession, the share of homes being built fell significantly, causing buyer demand to exceed housing production. In fact, fewer new homes were built in the decade following the Great Recession than in any decade since the 1960s. This deficit has now expanded even further, contributing to a shortfall of over 3 million homes and growing.
Some of the leading factors responsible for the housing shortage are land availability and exclusionary zoning laws, which restrict the kinds of homes that can be put in certain neighborhoods—maintaining segregation. Examples of exclusionary zoning laws include minimum lot and square footage requirements, limits on the height of buildings, and restrictions on building multi-family homes. These laws have historically sought to exclude lower-income residents from living in more affluent suburban developments with access to high-performing schools, employment, and other amenities. In the early decades of the 20th century, these laws were also used as a vehicle for explicit racial discrimination excluding Black residents from predominantly white neighborhoods.
Today, the legacy of these laws remains in place and has had far-reaching consequences for all families trying to secure housing. Despite the Fair Housing Act prohibiting discrimination based on race, color, national origin, religion, sex, and other identities, the law does not prohibit class-based discrimination. This allows a legal loophole where people earning low incomes can be restricted to certain neighborhoods and excluded from living in more affluent areas with broader investment and economic opportunity. Given that Black and Latinx families have far less wealth and income than white households, on average, these exclusionary zoning laws are often used to intentionally drive people of color out of certain communities and keep neighborhoods more uniformly white. The pattern of this discriminatory practice over time has exacerbated many racial economic disparities we see today and also takes root in the current housing unaffordability crisis.
The Federal Reserve has been under intense pressure in recent months to sharply raise interest rates in the name of taming inflation. The voices calling for these rate increases often explicitly say that they are worth doing even if they greatly increase the risk of recession. At their last open market committee meeting, the Fed heeded these voices and raised rates by 0.75%—the largest single increase in 28 years—and indicated commitment to continuing to raise rates until inflation normalized, even if this increased the risk of recession.
The Fed’s actions to date do not guarantee a recession, but they have already made one more likely. Moreover, if they continue on a hawkish path much longer, a recession is quite probable. This would be a huge and avoidable policy mistake. Inflation is not being driven by large macroeconomic imbalances between aggregate demand and supply. Wage growth is already decelerating noticeably. In short, the point of rate hikes—bringing demand and supply into balance and restraining wage growth—has already been accomplished.
Besides failing to recognize these points, many voices in this debate have implicitly or explicitly argued that recession and inflation cause equivalent damage, or that inflation actually causes worse damage than recession. This view is clearly wrong—the economic damage wrought by recessions is far greater than that by single-digit inflation rates.
A common argument runs that inflation harms everybody in the economy, but only those who lose their job are harmed by recession. This is the opposite of truth. A recession directly reduces economy-wide incomes while inflation does not.
Rising minimum wages in 20 states and localities help protect workers and families against higher prices
On July 1, three states, 16 cities and counties, and the District of Columbia raised their minimum wages. These updates can all be viewed in EPI’s interactive Minimum Wage Tracker and in Table 1 and Table 2 below. At a time when families are coping with rising prices, these increases will help many low-wage workers and their families make ends meet.
State minimum wage increases
Connecticut, Nevada, Oregon, and the District of Columbia raised their minimum wages, with increases ranging from $0.50 per hour in Oregon’s nonurban counties1 to $1.00 in Connecticut. The new wage floors in Connecticut ($14.00), Nevada ($10.50), and Oregon ($13.50) were set in legislation passed in the last few years, while the District of Columbia’s minimum wage ($16.10) went up due to automatic annual inflation adjustment built into the District’s minimum wage law. (Eighteen states and the District of Columbia, as well as dozens of cities and counties, have automatic annual inflation adjustment built into their minimum wage laws.)
Added to the 21 states that raised their minimums at the start of the year, a total of 24 states and the District of Columbia have raised their minimum wages in 2022. Florida and Hawaii also have minimum wage increases scheduled to occur in October. Hawaii’s increase will be the first of four increases, recently enacted by state lawmakers, that will ultimately bring the state’s minimum wage to $18 by 2028.
This Friday’s data from the Bureau of Labor Statistics (BLS) could be enormously consequential for what the Federal Reserve does over the next few months. If, as we think, Friday’s data continue to show decelerating wage growth, then the Fed really doesn’t need any more interest rate increases to contain inflation. But if the Fed ignores this and tightens anyhow, the magnificent achievement of a rapid recovery from the worst economic shock of the century could be thrown away, snatching defeat from the jaws of victory.
In March and April of 2020 as COVID-19 first spread across the United States, 22 million jobs were lost. Aided by the CARES Act passed in April 2020, the first 12 million jobs came back pretty easily over the following six months—businesses that had closed their doors but not gone bankrupt during the months of lockdown simply re-opened. But, job growth slowed in every month between August 2020 and December 2020—and in that last month employment contracted. Progress had not just stalled but gone backwards. At a similar point in the recovery from the Great Recession of 2008–2009, fiscal policymakers perversely shifted toward austerity and the result was that it took a full 10 years to regain pre-recession labor market health.
This time, however, additional fiscal support was passed in December 2020 and with the American Rescue Plan in March 2021. And since December 2020, the pace of job growth has been spectacular, with 9.2 million jobs added in 17 months—about 540,000 jobs every single month. Fiscal policy led the way on this, but the Federal Reserve has played a strong supporting role in boosting growth over this time as well. Today, unemployment is fully recovered to pre-pandemic levels and labor force participation nearly so. This is a huge policy accomplishment.
State and local governments have made transformative investments with American Rescue Plan recovery funds in 2022: A tighter focus on working families and children will have the greatest impact going forward
An earlier version of this post reported that large cities and counties had only budgeted 50% of their allocated funds. However, this number is misleading as only 50% of SLFRF funds for local governments were disbursed in 2021. This post has been edited to show that 83% of the received funds had been budgeted.
As most states wrap up their legislative sessions, we can assess expenditures of State and Local Fiscal Recovery Funds (SLFRF), appropriated by the American Rescue Plan Act (ARPA), so far this year. Many state and local governments have used ARPA funds to make transformative investments to support an equitable recovery, while others have used the funds in ways that will do much less to stimulate the economy, enhance racial equity, or support low-wage workers and their families. State and local governments still have considerable remaining ARPA resources to spend, and ample opportunity to use them effectively.
By now, nearly all of the $350 billion in ARPA funds has been disbursed by the federal government to the states; some entities got all their funds at one time in 2021, but most had half their funds withheld to 2022. According to the National Council of State Legislatures, states and territories have so far appropriated $133 billion of the $199.8 billion allocated to them for SLFRF. Below the state level, it’s not possible to know exactly how much of the approximately $150 billion allocated to cities, counties, and tribal governments has been spent, since those reports are not publicly available. However, the largest cities and counties are required to file reports on SLFRF funds, and as of the end of 2021, 83% of the money they received in the first tranche of funding has been budgeted, according to an analysis by the Treasury Department. (This does not mean all budgeted funds have already been spent.)
Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for May. Read the full Twitter thread here.
The hires and layoffs rates held steady in May as the quits rate ticked down slightly. Hires remain elevated by historical standards as workers get (re)absorbed into the labor market. High quits signals a stronger labor market where workers can quit, search, and obtain new jobs. pic.twitter.com/0MYPh51VD6
— Elise Gould (@eliselgould) July 6, 2022
Against panic: The Fed should not be given permission to cause a recession in the name of inflation control
The disappointing May data on consumer prices—showing continued strong growth of overall inflation and no real reduction of core inflation—seem to have been a turning point in how many influential policymakers and analysts view the U.S. inflation problem. In particular, it has inspired near-panic and damaging exhortations that the Federal Reserve should push the economy to the brink of recession in the name of fighting inflation. It has also led to preemptive absolutions of the Fed of any criticism that might come their way if a recession does result from steep interest rate increases.
This panic is unwarranted, and the Federal Reserve should not feel free to ratchet up interest rates without regard to the risk of recession. Years from now, a recession induced by the Fed raising rates too quickly will be seen clearly as a policy mistake that could have been avoided. This conclusion stems from several simple facts:
- Both real output and the economy’s underlying productive capacity (potential output) are essentially in line with what pre-pandemic forecasts projected by mid-2022. None of these pre-pandemic forecasts indicated this would imply economic overheating by now. Given this, the macroeconomic balance between demand and supply cannot be so out of alignment that it explains a large share of the acceleration of inflation in the past 15 months.
- Crucially, potential gross domestic product (GDP) was clearly above actual GDP for most of 2021 when inflation started. This is very hard to square with macroeconomic imbalances driving the rise of inflation.
- Finally, there is rich, existing literature on the degree of inflation to expect given an overshoot of aggregate demand over potential supply. These estimates imply substantially less inflation than we’ve seen to date, meaning that factors besides simple macroeconomic imbalances are likely at play.
- While the May price data were discouraging, there is reason to think that some of the drivers of inflation in recent months may be losing steam.
- Profit margins are still at historically high levels but have come down significantly in 2022.
- Wage growth has lagged inflation over the entire episode and has even decelerated in recent periods. This means that wages’ role as a dampener of inflation looks set to continue (and maybe even strengthen) in coming months.
- The main channel through which higher interest rates will put downward pressure on prices runs through a softer labor market (higher unemployment) reducing growth in labor incomes, which reduces demand and reduces pressure on prices from the cost side as well. But, labor income growth has not been a key driver of inflation so far; in fact, wage growth has significantly dampened the growth of inflation over the past 15 months. In the past six months, hourly wage growth is actually running at a pace entirely consistent with the Federal Reserve’s 2% long-run inflation target.
Revoking tariffs would not tame inflation: But it would leave our supply chains even more vulnerable to disruption
- Section 232 and 301 tariffs have nothing to do with the current inflationary spike. The tariffs—implemented in 2018—had little effect on U.S. prices, and inflation only spiked after the pandemic recession began in February 2020.
- Eliminating tariffs would not significantly reduce inflation. At best, removing these tariffs would result in a one-time price decrease of 0.2%—a drop in the bucket when consumer prices have risen by more than three times as much, on average, every month since January 2021, driven largely by pandemic-related global supply chain disruptions and the war in Ukraine.
- Removing these tariffs would undermine U.S. steel and aluminum industries and increase domestic dependence on unstable supply chains. Tariff removal would result in job losses, plant closures, cancellations of planned investments, and further destabilize the U.S. manufacturing base at a time of intensifying strategic importance for good jobs, national security, and the race to green industry.
With dwindling options on inflation and a mounting chorus of special interest business lobbies, the Biden-Harris administration is reportedly considering removing some Trump-era tariffs in an effort to moderate rising prices in the U.S. economy.
Tempting as such an action may seem, it is certain to have unnoticeable effects on overall prices—at best. And the action will ensure, moving forward, that our supply chains will be even more vulnerable to the kinds of disruption risks we are seeing play out right now. These tariffs offer a tangible policy response to a real-world economy rife with market failures that invalidate the predictions of canonical economic trade models used to argue against keeping the tariffs.
In the absence of a more comprehensive approach to U.S. industrial strategy, the tariffs are working to resuscitate America’s industrial base and have done so with no meaningful adverse impacts on prices. Pulling the rug from under this rebuild now, without first putting in place other policy solutions to address costly market failures, risks undoing this progress and jeopardizing the financial conditions in industries that are critical to building the infrastructure and renewable energy investments needed to power future economic growth.
There has been a surge of action in cities and other localities across the country to advance workers’ rights.
A just released report, issued by EPI, the Harvard Labor and Worklife Program, and Local Progress, provides a comprehensive overview of this local government labor activity, highlighting what cities and other localities have been doing and offering a blueprint of what they can do.
- 52 localities have enacted their own higher local minimum wages, and 19 have passed paid sick leave laws. Some cities have passed cutting-edge laws requiring predictable scheduling, outlawing arbitrary firings in certain industries, securing pay for independent freelance workers, and protecting workers during the COVID-19 pandemic.
- At least 20 localities have created or are creating dedicated local labor agencies, including large coastal cities like New York, San Francisco, and Seattle, as well as cities like Chicago, Denver, Minneapolis, Saint Paul, and soon Tucson.
- Some cities are requiring high-road or at least legally compliant practices among their contractors by setting prevailing or living wages, or passing responsible bidder ordinances. Others have set up systems under which permits or licenses can be revoked for labor violations.
- Although some cities are preempted by state law from passing laws, there’s still a lot they can do: educating workers about their rights, providing good jobs to their own municipal employees, setting high standards for contractors and vendors, reporting on local conditions, and showing public support to workers standing up for their labor rights.
Although many local governments have embraced this new role of looking out for workers, there’s still tremendous untapped potential for more action.
As young adults across the country graduate from high school and college, it’s an appropriate time to reexamine how the labor market is performing for young workers. Young workers, 16–24 years old, were among the hardest hit in the pandemic recession, given their vulnerability to labor market downturns in general and their specific exposure to economic weakness in the pandemic. For instance, a quarter of young workers had leisure and hospitality jobs, where employment declined 41% in the spring of 2020.
Fortunately, unlike the protracted recovery from the Great Recession, policymakers responded to the pandemic recession by enacting policies at the scale of the problem. As a result, the economy bounced back quickly, and employment is now within 1% of pre-recession levels. Mirroring the overall labor market recovery, young workers have also experienced a tremendous recovery from the depths of the pandemic recession.
In April 2020, the overall unemployment rate spiked to 14.7%. Over the last three months, the unemployment rate has leveled out at 3.6%—basically at pre-pandemic levels—while labor force participation continues to recover steadily. Figure A compares the unemployment rate of young adults, ages 16–24, with workers ages 25 and up through the last two recessions. There are two key factors to note from the figure. First, young workers tend to have much higher unemployment rates than older workers, on average about two and a half times higher. Second, both groups of workers saw a huge increase in unemployment in the spring of 2020 and both groups have experienced a tremendous bounce back, far faster than the recovery from the Great Recession.
Proposed New York state minimum wage increases would lift wages for more than 2 million workers through 2026: Minimum wages would range by region from $16.35 to $21.25 per hour by 2026
Proposed legislation in the New York state legislature would ensure that low-wage workers in New York are protected from rising prices and benefit from improvements in the broader economy. Senate bill S3062C and assembly bill A7503B would schedule annual increases to the minimum wage that would be linked (or “indexed”) to the combination of the consumer price index (CPI) and a measure of labor productivity. We estimate that the resulting increases in the state minimum wage would lift wages for more than 2 million New Yorkers through 2026.
New York’s minimum wage law sets separate minimum wages for three different regions of the state: New York City, the suburban counties of Nassau, Suffolk, and Westchester, and the remainder of upstate New York. Under current projections1 for inflation and labor productivity, as shown in Table 1, indexing the minimum wage to changes in prices and productivity would increase New York City’s minimum wage from $15.00 where it is now to $21.25 by 2026. Nassau, Suffolk, and Westchester counties’ minimum wage would rise from $15.00 to $18.65 by 2026, and the rest of the state would increase from $13.20 to $16.35.
Since New York state law sets the minimum wage for tipped workers (also known as the “tipped minimum wage”) at two-thirds of the regular minimum wage, these changes would also lead to a rising tipped minimum wage and pay increases for the state’s tipped workers. As discussed more below, indexing the minimum wage in this way would protect the buying power of millions of low-wage workers’ paychecks and, in particular, improve the economic security of predominantly women, Black, and Latinx workers.
- More than 26 different nations are represented in the AAPI community in the U.S. The broad generalization inherent in the AAPI categorization can obscure the economic reality for many groups within the AAPI community.
- Disaggregated hourly wage data show that groups within the AAPI community face economic disparities. While AAPI average wages are close to the national average, many groups within the AAPI community lag behind.
- Differing immigration paths and histories within the AAPI community influence which groups might be doing better economically in the United States today.
The U.S. Asian American and Pacific Islander (AAPI) community encompasses over 24 million people, with origins spanning countries in Central, East, and Southeast Asia, the Indian subcontinent, and the island nations in the Pacific.1 This diverse population has been growing rapidly in the United States: Between 2010 and 2020, there was a nearly 40% increase in the number of people who identified as Asian alone or in combination, and a 30% increase for Native Hawaiians and other Pacific Islanders.
Whether they have immigrated recently or lived in the United States for centuries, the AAPI community is a vital piece of American society and the workforce. It is important to note, however, that this group is not a monolith, and examining AAPIs as an aggregate can obscure the economic reality for many groups within the AAPI community. In this post, we examine this varied group in more detail and calculate their hourly wages at a disaggregated level to shed greater light on the actual economic circumstances of Asian Americans and Pacific Islanders, and the economic disparities they may face.
The labor market is largely strong right now, but inflation continues to be a pressing economic concern.
The reasons for escalating inflation are hotly debated, but some theories gaining traction have not been grounded in the data. EPI research sets the record straight on the causes of inflation—and how policymakers can best restrain it. Below, we debunk 5 top inflation myths.
- Myth #1: Workers’ wage growth is driving inflation. Nominal wage growth—while faster relative to the recent past—has lagged far behind inflation, meaning that labor costs have been dampening, not amplifying, inflationary pressures all along.
- Myth #2: Corporate profits are not contributing to inflation. In fact, fatter corporate profit margins have driven over half of the increase in prices in the nonfinancial corporate sector between the second quarter of 2020 and the end of 2021. This is not normal. From 1979 to 2019, profits only contributed about 11% to price growth. Ignoring the role of profits makes inflation analyses a lot weaker.
- Myth #3: Federal relief and recovery measures overheated the economy and fed inflation. Evidence from the past 40 years suggests strongly that profit margins should shrink and the share of corporate income going to labor compensation should rise as unemployment falls and the economy heats up. But the exact opposite pattern has happened so far in the recovery—casting much doubt on inflation expectations rooted simply in claims of macroeconomic overheating. In short, the labor market is strong, but it’s not overheating.
- Myth #4: Removing import tariffs would be a major tool to fight inflation. Tariffs were put in place far before early 2021 when inflation began rising, and eliminating tariffs could not significantly restrain it. Further, removing tariffs would not be costless. Tariff removal could result in job losses, plant closures, cancellations of planned investments, and further destabilization of the domestic manufacturing base, which would increase domestic dependence on unstable import supply chains.
- Myth #5: Investments in child and elder care would accelerate inflation. In fact, investments in child and elder care could help restrain inflationary pressures. By subsidizing families’ use of child and elder care and providing direct investments to providers, such investments could boost future labor supply by allowing working-age parents or children who want to look for paid employment to do so while remaining confident their family members are receiving care.
Below, EPI economists offer their initial insights on the jobs report released this morning, which showed 390,000 jobs added in May and wage growth moderating.
On Friday, the Bureau of Labor Statistics (BLS) will release the latest numbers on the state of the labor market. Along with rising payroll employment and increases in labor force participation as workers enter or return to the labor market, I will continue to watch nominal wage growth. While some have pointed to fast nominal wage growth as a source of concern in the U.S. economy, this is largely misplaced. Instead, nominal wage growth continues to dampen, not amplify, inflationary pressures, and it has actually decelerated in recent months. And, nominal wage growth running faster than pre-pandemic rates has managed to provide a useful spur to hiring in sectors that were most damaged by the pandemic shock.
Over the last year, in a welcome change, wage growth has been faster at the lower end of the wage distribution, as the labor market has improved and employers try to attract and retain the workers they want. At the same time, employment has grown dramatically because Congress made fiscal investments at the scale of the problem, and employment in the private sector is now within 1% of pre-pandemic levels. While some complain that any wage growth faster than pre-pandemic rates is a sign of damaging labor shortages that are constraining growth, this doesn’t fit the facts. At a macroeconomic level, the economy continues to absorb new workers at historically high rates. And across industries, there is no evidence that fast wage growth is constraining job growth.
Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for April. Read the full Twitter thread here.
Hires and quits rates both held steady in April as layoffs edged down. Hires remain elevated by historical standards as workers get (re)absorbed into the labor market. High quits is a sign of a strengthening labor market where workers can quit, search, and obtain new jobs. pic.twitter.com/gjrHN2sPPQ
— Elise Gould (@eliselgould) June 1, 2022
The future of work depends on stopping Amazon’s union busting: Shareholders and policymakers must all play a role in protecting Amazon workers’ rights
This week’s Amazon shareholder meeting provides an important opportunity to consider urgent steps shareholders and policymakers can take to protect the threatened rights of unionizing Amazon workers and counter the company’s growing impact on income inequality, racial and gender disparities, and the degradation of work across the labor market.
The agenda for the May 25th annual meeting includes the election of company directors, approval of executive compensation, and several shareholder resolutions concerning Amazon’s employment practices and labor law violations. While Amazon opposes all these resolutions, shareholders should take the opportunity to reject excessive pay for Amazon’s CEO and support resolutions calling for audits of worker health and safety, racial equity and racial and gender pay gaps, employee turnover, and Amazon policies and practices affecting workers’ rights to freedom of association and collective bargaining. Meanwhile, state and federal policymakers should take note of the policy priorities the resolutions suggest for ensuring that Amazon’s anti-union, high-risk, high-turnover business model isn’t allowed to dictate the future of work in the United States and across the globe.
Amazon’s use of a wide range of legal and illegal tactics to prevent workers from unionizing has been well documented. Amazon engaged in months of coercion, intimidation, vote gerrymandering, and retaliation against Bessemer, Alabama, warehouse workers in the lead-up to their 2021 union election. Aggressive company surveillance led many workers to believe the company was monitoring their secret ballot votes—an offense so egregious it led the National Labor Relations Board (NLRB) to order a brand-new election (the 2022 outcome of which remains too close to call).
In April, Amazon workers at the JFK8 warehouse in Staten Island overcame similar obstacles, including numerous Amazon labor law violations, to win a decisive union election victory. In response, Amazon has refused to recognize the new Amazon Labor Union, instead dragging out legal challenges and refusing to meet with workers to start bargaining a contract. A new report published last week further documents the failure of Amazon’s corporate policies and practices to meet international human rights standards for respecting workers’ rights to freedom of association and collective bargaining.
Guest post: Food insufficiency in families with children increased after expiration of Child Tax Credit monthly payments
Amidst the continuing COVID-19 pandemic and increased inflation, 15% of households with children reported food insufficiency in March–April 2022. The reports of food insufficiency—sometimes or often not having enough food to eat in the past week—are from the nationally representative Household Pulse Survey (HPS), an internet survey conducted by the U.S. Census Bureau.
Food insufficiency among families with children poses a short- and long-term moral and economic threat to the United States. Even brief disruptions in access to food can have lasting consequences. Not having enough to eat often disrupts children’s cognitive and emotional development and education. This was the case for a child who disclosed that the reason she was fidgeting and not paying attention in class was that she did not have enough food to eat. There may be lifelong ramifications of not having enough to eat in childhood, including increased likelihood of poor health outcomes and avoidable medical expenditures across the lifespan.
Fortunately, Congress can help. Several studies indicate that advance Child Tax Credit (CTC) payments, expanded under the American Rescue Plan Act, were associated with reduced poverty and food insufficiency in households with children.
Following Dr. Lisa Cook’s historic confirmation to the Federal Reserve Board, we must acknowledge the importance of Black economists for public policy and the economy
Earlier this year, President Biden nominated two Black economists, Dr. Lisa Cook and Dr. Philip Jefferson, to serve as members of the Federal Reserve Board of Governors. On May 10, 2022, Dr. Cook was confirmed in a 51–50 party-line vote, which made her the first Black woman to sit on the Board in its 108-year history. The following day, Dr. Jefferson was confirmed on a 91–7 bipartisan vote, making him the fourth Black man to sit on the Board, but marking the first time two Black governors will serve simultaneously.
Despite this tremendous accomplishment, the nomination of Dr. Cook faced great scrutiny and criticism, with several Senate members questioning her qualifications and expertise despite her years of professional and academic experience in economic development, financial institutions and markets, economic history, and international relations. Sadly, this isn’t new for Black professionals, and specifically not for Black women.
Within the workplace and historically, Black women’s skills and contributions are often undermined, underappreciated, and devalued. These discriminatory roots have led to intersectional gender and racial inequities in the kinds of jobs Black women are hired for as well as the wages and benefits they receive. However, another glaring detail we can glean from the captious confirmation process of Dr. Cook—and the exclusion of Black women from the Federal Reserve Board’s panel for over a century—is how Black economists are broadly underrepresented and their essential view on racial economic inequality is often discounted.
The underrepresentation of Black scholars in the field of economics can be traced to the low numbers of Black students pursuing degrees in economics. In the academic year 2019–2020, there were more than 1,200 doctoral degrees awarded to students in economics. However, less than 2% of doctoral degrees were awarded to Black economics students overall and less than 1% were awarded to Black women. For undergraduate students, Black students overall accounted for 4.1% of bachelor’s degrees awarded in economics and Black women accounted for only 1.5%.