Today’s jobs report brings some positive news to balance the disappointing first quarter estimates of GDP growth (a meager 0.1 percent) announced earlier this week; there were 288,000 jobs added in April. At the same time, the unemployment rate fell to 6.3 percent, but this decline was entirely the result of people leaving the labor force, not people finding work. While all major race and ethnic groups experienced a similar pattern of declining unemployment rates and labor force participation rates in April, there are some interesting insights into the upward trend in the black-white unemployment rate gap to be gained from today’s numbers.

As unemployment rates have gradually declined over the last four years, the black-white unemployment rate ratio has been increasing and is currently higher than it was before the recession, meaning that there’s been less improvement in the black unemployment rate than the white rate. Indeed, the African American unemployment rate remains 3.3 percentage points higher than the 2007 average while the white unemployment rate is just 1.2 percentage points higher than in 2007.

Further, when we look at the difference between the current and 2007 employment-population ratios, we find that the decline in the share of employed working age adults in the population was greater for African Americans (down 4.6 percentage points) than for whites (down 3.9 percentage points).

Read more

After a few months of the labor force participation rate (LFPR) showing what was hopefully early signs of strength, it dropped back down to its low of the recovery in March. The biggest drops in labor force participation in March were among young workers; the LFPR of workers under age 25 dropped 1.3 percentage points, from 55.6 percent to 54.3 percent. (However, these series are erratic due to small sample sizes, and the April decline in the under-25 LFPR was simply a reversal of its jump up in March.) The biggest drop in LFPR in April was among men under the age of 20. To my knowledge, data on unemployment insurance exhaustions by age don’t exist, but it is unlikely that young workers are a big proportion of exhaustions. This means that the April drop in labor force participation is likely not being driven by the expiration of federal unemployment insurance benefits last December as some have suggested, but simply by the weak labor market.

There is currently an all-time-high of 6.2 million missing workers (potential workers who are neither working nor actively seeking work due to the weak labor market). Almost a quarter of them (1.4 million) are under age 25. The figure below shows that the unemployment rate for young workers would be 18.4 percent instead of 12.8 percent if the missing young workers were in the labor force looking for work and thus counted as unemployed.

For a complete picture of the labor market prospects facing the new cohort of young adults graduating from high school and college this spring, see the Class of 2014 report released yesterday. It includes, for example, a detailed discussion of the finding that there is little evidence that today’s missing young workers are “sheltering in school”.

Sen. Mike Enzi (R-WY) is a nice, older man who remembers the years of his youth with a golden glow. His father owned a shoe store, so Enzi had a comfortable life. He went to college and eventually took over his dad’s business. He says he was paid the minimum wage when he started out as a “stock boy,” so he ought to have some empathy for minimum wage workers today, many of whom don’t have business owners for fathers and have to support themselves and other family members, as well.

But instead, Enzi voted against raising the minimum wage in the U.S. Senate yesterday. In fact, he voted against even bringing the issue up for debate. He doesn’t think today’s minimum wage workers are worth as much as he was. Back in 1963, when Enzi was 19, the minimum wage was $1.25, which would be $9.65 today. Enzi doesn’t want to debate a bill to raise the minimum from $7.25 an hour, apparently believing that he was worth $2.40 an hour more than today’s minimum wage workers, many of whom are in their thirties, veterans, or parents. More than 40% of those who would benefit from an increase to $10.10 an hour have been to college and have more education than Enzi did when he earned the minimum wage.

Why doesn’t Enzi think these workers are worth as much as he was? As Paul Whitfield reports in the Los Angeles Times, Sen. Enzi says today’s workers “don’t know how to interrupt their texting to wait on a customer.” Really? More than half of the workers who would benefit from a raise to $10.10 an hour are over 30, and more than 1 in 10 are at least 55 years old.

Whether from scorn or simple lack of empathy for their fellow citizens, Enzi and his fellow Republican senators who have voted against helping the long-term unemployed, voted to cut families off food stamps, or voted to deny workers an increase in the minimum wage to the level of purchasing power Enzi received 50 years ago are consistent in pulling up the ladder of opportunity after climbing it themselves—or after having been set at the top by family circumstances. From way up there in the one percent, the people at the bottom apparently look undeserving.

Last week EPI published the report Do Poor Kids Deserve Lower-Quality Education Than Rich Kids? Evaluating School Privatization Proposals in Milwaukee, Wisconsin, authored by University of Oregon associate professor Gordon Lafer, an EPI research associate. The paper includes a detailed examination of a “blended learning” model of education that replaces teachers with online learning for part of the school day, long a source of controversy in education policy debates. This approach is exemplified by the Rocketship chain of charter schools, which is being promoted for expansion in Milwaukee.

EPI maintains the highest standards of rigorous research, and this report is no exception. Dr. Lafer’s description of Rocketship’s model was largely based on Rocketship’s own corporate documents, which were cited repeatedly in the report. In addition, the author interviewed Rocketship representatives both in Milwaukee and at the company’s national headquarters, including several top executives.

After the report was published, the author emailed a copy to Rocketship executives, inviting their comment and specifically asking them to identify any particular facts in the report they might believe to be incorrect.

While Rocketship responded by issuing a statement denouncing EPI’s report, the statement is a recitation of talking points rather than a rebuttal of the report’s rigorously researched and meticulously documented findings. Indeed, the company has not identified a single inaccurate fact in the report. Further, neither this report nor EPI as an organization is opposed to charter schools per se; indeed, the report concludes with proposals for accountability standards that would allow charter schools to function on an equal footing with public schools.

Read more

There are currently nearly one million “missing workers” under the age of 25. (In total, there are 5.3 million missing workers, who are neither working nor actively seeking work due to the weak labor market.) In March, the total number of missing workers dropped substantially, due almost entirely to an increase in the labor force participation of workers under the age of 25, particularly men. It turns out that the March increase in labor force participation of young men simply partially reversed a five-month slide, and their labor force participation remains far below its long-run trend. However, what happens with the labor force participation of young men in April will help clarify whether the March increase was a real step in the right direction or just a one-month fluke in a volatile series.

The figure below shows the number of missing young workers (men and women combined). There is a great deal of volatility month-to-month, so looking at the long-run trend is crucial. The number of missing workers under age 25 shot up to 1.6 million between early 2007 and early 2010, and then fluctuated around that level for a year-and-a-half, before declining to its current level of 950,000 (580,000 men and 370,000 women). I should note that this calculation takes into account long-run trends in labor force participation, such as lower labor force participation of young people due to increasing college enrollment over recent decades. (The methodology for calculating the number of missing workers is described here.) But it is also true that today’s missing young workers have not been able to “shelter in school” from the labor market effects of the Great Recession. Increases in college and university enrollment rates between 2007 and 2012 were no greater than the increases seen before the recession began—and since 2012, college enrollment rates have dropped substantially. This is discussed in more depth in my latest paper, on the class of 2014.

Figure A

Missing workers* under age 25, January 2006–March 2014

	Missing workers
Jan-2006	230,000
Feb-2006	-20,000
Mar-2006	70,000
Apr-2006	150,000
May-2006	60,000
Jun-2006	0
Jul-2006	50,000
Aug-2006	-160,000
Sep-2006	110,000
Oct-2006	-40,000
Nov-2006	-120,000
Dec-2006	-200,000
Jan-2007	-120,000
Feb-2007	50,000
Mar-2007	90,000
Apr-2007	380,000
May-2007	570,000
Jun-2007	230,000
Jul-2007	420,000
Aug-2007	710,000
Sep-2007	200,000
Oct-2007	300,000
Nov-2007	160,000
Dec-2007	290,000
Jan-2008	140,000
Feb-2008	560,000
Mar-2008	530,000
Apr-2008	350,000
May-2008	-80,000
Jun-2008	190,000
Jul-2008	210,000
Aug-2008	300,000
Sep-2008	270,000
Oct-2008	360,000
Nov-2008	620,000
Dec-2008	470,000
Jan-2009	760,000
Feb-2009	500,000
Mar-2009	630,000
Apr-2009	540,000
May-2009	660,000
Jun-2009	670,000
Jul-2009	770,000
Aug-2009	940,000
Sep-2009	1,170,000
Oct-2009	1,410,000
Nov-2009	1,360,000
Dec-2009	1,460,000
Jan-2010	1,640,000
Feb-2010	1,510,000
Mar-2010	1,470,000
Apr-2010	1,240,000
May-2010	1,400,000
Jun-2010	1,680,000
Jul-2010	1,540,000
Aug-2010	1,360,000
Sep-2010	1,610,000
Oct-2010	1,440,000
Nov-2010	1,370,000
Dec-2010	1,650,000
Jan-2011	1,460,000
Feb-2011	1,570,000
Mar-2011	1,480,000
Apr-2011	1,580,000
May-2011	1,700,000
Jun-2011	1,720,000
Jul-2011	1,780,000
Aug-2011	1,480,000
Sep-2011	1,370,000
Oct-2011	1,220,000
Nov-2011	1,290,000
Dec-2011	1,380,000
Jan-2012	1,600,000
Feb-2012	1,390,000
Mar-2012	1,470,000
Apr-2012	1,520,000
May-2012	1,410,000
Jun-2012	1,310,000
Jul-2012	1,310,000
Aug-2012	1,690,000
Sep-2012	1,480,000
Oct-2012	1,220,000
Nov-2012	1,220,000
Dec-2012	1,210,000
Jan-2013	1,110,000
Feb-2013	1,300,000
Mar-2013	1,510,000
Apr-2013	1,320,000
May-2013	1,300,000
Jun-2013	1,040,000
Jul-2013	1,190,000
Aug-2013	1,350,000
Sep-2013	1,080,000
Oct-2013	1,270,000
Nov-2013	1,300,000
Dec-2013	1,290,000
Jan-2014	1,360,000
Feb-2014	1,480,000
Mar-2014	950,000

ChartData Download data

The data below can be saved or copied directly into Excel.

The data underlying the figure.

* Potential workers who, due to weak job opportunities, are neither employed nor actively seeking work, and are thus not reflected in the unemployment rate

Source: Authors' analysis of Toossi (2007) and Current Population Survey public data series

Share on Facebook Tweet this chart

Embed

Copy the code below to embed this chart on your website.

<iframe width="100%" height="460" src="https://www.epi.org?p=64066&view=embed&embed_template=charts_v2013_08_21&embed_date=20260612&onp=64585&utm_source=epi_press&utm_medium=chart_embed&utm_campaign=charts_v2" frameborder="0"></iframe>

Download image

Read more

Earlier today, House Budget Committee Chair Paul Ryan (R-Wis.) continued his study of poverty with a hearing entitled, “A Progress Report on the War on Poverty: Lessons from the Frontlines.” Featuring witnesses from several poverty-fighting non-profits, Rep. Ryan styled the hearing as a “listening exercise” to hear about the strategies these charities and non-profits use to help alleviate poverty on the local level.

While it is admirable that Rep. Ryan gave a platform for community leaders to share their stories, he seems to have no sense of the scale of the problem before him. Indeed, Rep. Ryan’s veneration for the work of private charity is quite the contrast with his opinion of the federal government’s anti-poverty programs, which he has disparaged as “duplicative,” “complex,” and “ineffective.” However, for as much good work as it does, private philanthropy has well-known biases, as charitable donations tend to flow disproportionately to more glamorous causes, and often dry up during business cycle downturns—just when they’re needed most. In short, while individual charities and non-profits do incredible work to help our communities, they lack the ability to create widespread change; only the federal government has the resources to help alleviate poverty at the scale that is required.

Read more

Today’s GDP report was, not to get too technical, just crummy nearly across-the-board. Consumption spending was up, but the personal savings rate fell, meaning that the increased consumer spending was not financed by good wage and income growth, but by reducing savings. Exports fell sharply (hard to blame on bad U.S. weather) while most categories of investment fell as well. Core price deflators also ticked down again, signaling that economic slack is surely not shrinking.

One of the only bright spots in the report was that government spending is shifting from a large drag on growth to roughly neutral. This is what qualifies as decent news in today’s low expectations economy, I guess. We’ve tried to illustrate the historically large drag that austerity has put on the current recovery, in a bunch of ways. Here’s another try.

The figure below shows the simple percentage point contribution to GDP growth from government spending.  Two things stand out.

Read more

The tentative deal reached between Detroit Emergency Manager Kevyn Orr and the Detroit pension funds has been characterized in the New York Times and other news reports as a victory for workers and retirees. This is true only in the sense that much worse cuts had been threatened.

The confusion stems from a tendency to treat cost-of-living adjustments (COLAs) as icing on the cake rather than necessary for subsistence, when in fact workers would be better off with equivalent across-the-board cuts than an erosion in the real value of benefits. COLA cuts take a bigger bite as retirees age and face dwindling savings and higher out-of-pocket health costs (exacerbated, in this case, by proposed cuts to retiree health benefits).

The deal would initially cut the pensions of general employees by 4.5 percent and eliminate these workers’ 2.25 percent annual COLA. Police and firefighters would see no initial cuts and would retain a 1 percent annual COLA. Though the uniformed services face a smaller cut in percentage terms (a reduction of roughly 15 percent in real lifetime benefits as shown in the table below), they lose more in dollar terms because they tend to retire younger and have larger pensions. Because Detroit police and firefighters aren’t covered by Social Security, their real incomes in retirement may be nearly as affected as those of general employees, who face larger cuts in percentage terms but at least will receive inflation-adjusted Social Security benefits.

Read more

The House Ways and Means Committee plans to mark up six bills tomorrow that would make six temporary tax breaks—part of an annual tax extenders package—permanent. The justification being given for making these provisions permanent is they will “help businesses grow the economy and create jobs.” The resulting permanent increase in budget deficits, however, could eventually reduce economic growth and job growth if the debt-to-GDP ratio becomes large enough.

More importantly, two of the provisions cannot be said to boost even short-term economic growth. The CFC look-though rule (H.R. 4464) and the active financing exception (H.R. 4429) help multinational corporations avoid paying U.S. taxes and create incentives to move jobs and investments overseas. Making these two tax provisions permanent would eliminate jobs and increase budget deficits by $80 billion over the next 10 years.

The six tax provisions that Chairman Camp wants to make permanent are part of a group 50 to 60 temporary tax provisions that are routinely extended for another year or two, and which typically reduce tax revenues by about $100 billion over 10 years. Like other temporary measures, such as extending unemployment insurance for unemployed workers during times of weak labor demand, the budget cost of the tax extenders package is rarely offset. (Mr. Camp notes that paying for the tax extenders package “is not consistent with recent practice by Congress.”) But the House GOP is now demanding that a temporary extension of unemployment insurance (budget cost of about $10 billion) be fully paid for, but not the permanent extension of selected tax extenders (budget cost of $310 billion).

With this markup, committee chairman Dave Camp appears to have morphed from a serious legislator trying to piece together a revenue-neutral reform of our byzantine tax system to a politician who talks out of both sides of his mouth—he supports fiscal responsibility but is proposing to make six temporary business tax breaks permanent and in doing so increase federal deficits by over $300 billion over the next 10 years. If he were truly concerned about long-term fiscal challenges, he would offset these tax breaks by permanently closing other tax loopholes, and he would not be working to make provisions that kill jobs a permanent part of the tax code.