As young adults graduate from high school and college this spring, it’s a good time to reexamine how the labor market is performing for young workers. In this first blog post of a three-part series, we analyze the short- and long-run trends in job opportunities and school enrollment for young workers, defined as workers ages 16 to 24 years old. The second post will investigate the types of jobs young people work in and how that has changed over the current business cycle. The third post will focus on wage levels and trends through the pandemic labor market.
- Historically, the unemployment rate for young people ages 16–24 is about 2.6 times higher than people ages 25 and older.
- Young people are back to pre-pandemic labor market conditions, a much faster bounceback than any recovery in recent history. In fact, the unemployment rate for young adults is at its lowest since 1953.
- Over the last four decades, young people’s enrollment in high school, college, or university has increased while their employment has declined somewhat.
- The Class of 2023 is graduating into a stronger labor market than last year as measured by lower unemployment and underemployment rates as well as a smaller share not employed or not enrolled in school.
- Across race and ethnic groups, young Asian American and Pacific Islanders have the highest school enrollment and lowest employment rates, while young white people are most likely to be employed.
Don’t let businesses off the hook: The government’s role in creating segregation does not exonerate the private sector
A Wall Street Journal op-ed claims that private markets and capitalism have no responsibility for remedying racial segregation and the authors cite my previous book The Color of Law to back up their claims. While my book exposed the forgotten history of how government policy created segregation, that doesn’t mean the market was blameless in this apartheid and should get a free pass, as the Journal authors argue.
“The answer isn’t to place the burden on the market. It’s to root out bad government policies,” write David Henderson and Phillip Magness—who work at conservative policy centers (the Hoover Institution and the American Institute for Economic Research, respectively).
Henderson and Magness, however, identify no particular government policies whose rooting out would redress segregation while simultaneously avoiding a burden on markets. More to the point, however, they ignore the enormous responsibility for segregation that the private sector also bears, and its obligation to participate in reform to a much greater extent than any business enterprise now contemplates.
No way out: Older workers are increasingly trapped in crummy jobs and unable to retire: Growing disparities in work and retirement in 30 charts
“I prayed to God that he would take care of my health, body, mind, soul, and spirit.” Those words came from Libia Vargas De Dinas, a 72-year old diabetic janitorial worker who worked in a Florida county courthouse and got stuck in a holding cell by accident for three days in February.
At Christmas time last year, an 82-year-old Walmart cashier was finally able to retire after a viral TikTok video and GoFundMe campaign netted him over $100,000. A kind customer posted the TikTok video, saying, “I was astounded seeing this little older man still grinding working 8- to 9-hour shifts.”
Do these stories illustrate America’s retirement divide or are they oddities?
The evidence compiled in our recently released Older Workers and Retirement Chartbook suggests the former, though the story is complex and multilayered.
Once workers reach older ages, especially Black and brown workers, those who are not financially able to retire must accept low wages and poor working conditions because they know they have little chance of finding a better job, or any job at all, if they lose employment.
Because of this, for most of these workers, working longer does not prevent poverty in retirement, though it may postpone it for some time. Many are left with no choice other than claiming Social Security benefits early, leading to reduced Social Security benefits and increasing downward mobility and poverty in retirement. They have no way out.
The chartbook—produced by The New School’s Schwartz Center for Economic Policy Analysis and the Economic Policy Institute which documents an array of disparities in more than 30 charts—shines many spotlights on this grim reality. It provides evidence that millions are unable to retire due to financial stress while others are pushed into involuntary premature “retirement” even if they don’t have enough money to make ends meet.
Nearly half of older Americans are financially unready for retirement—many on the precipice of poverty. Most workers have little, if anything, in their retirement accounts; the median retirement account balance for Americans approaching retirement age is only $10,000. If nothing changes, older Americans may increasingly need to hope for random acts of kindness and GoFundMe pensions.
Speaker McCarthy’s debt limit proposal = enormous human toll: Proposal would impose burdensome work reporting requirements to restrict access to Medicaid and food stamps
This week, Speaker of the House Kevin McCarthy plans to hold a vote on a bill that would raise the nation’s debt limit, but only in conjunction with extraordinarily steep spending cuts and new barriers to accessing income support programs. This is the next milestone in House Republicans’ attempt to play a game of dangerous political brinkmanship with the U.S. economy, trying to force through harmful and deeply unpopular federal spending cuts in exchange for increasing the debt limit. This approach recklessly flirts with bringing on the economic catastrophe of a government default in the short term.
Speaker McCarthy’s proposal would slash spending across federal programs for the next decade, cutting federal resources for everything from child care programs to environmental protection safeguards. If these deeply unrealistic spending cuts actually came to pass, the human toll would be enormous, and economic growth would be deeply damaged.
The McCarthy proposal also resurfaces a completely inaccurate but alarmingly persistent conservative claim: the idea that government anti-poverty programs are unnecessarily generous, bloated, and are keeping people out of the workforce who should otherwise be supporting themselves entirely through income earned in the labor market. The proposal seeks to severely restrict access to Medicaid health coverage and food stamps by imposing onerous requirements to prove that recipients are working or looking for work. Past evidence about these types of burdensome reporting requirements shows clearly that they will not actually lead to increased employment but will deprive vulnerable families of vital support.
State and local experience proves school vouchers are a failed policy that must be opposed: As voucher expansion bills gain momentum, look to public school advocates for guidance
Recently passed school voucher bills in four states are part of an extreme and unpopular campaign to defund and privatize public schools. As momentum builds around efforts to divert public funds to private schools, lawmakers and advocates should recommit to opposing harmful voucher bills and supporting greater investment in public education. Research and advocacy by educators and champions of public education in the states can serve as a guide.
On Tuesday, the House Committee on Education and the Workforce held a congressional hearing on voucher expansion featuring three voucher advocates and one opponent. The hearing comes amid an intense, coordinated push this year by anti-public school advocates who have long sought to privatize public education, in part through state-level efforts to enact private school voucher programs in state legislatures across the country.
School vouchers—which include traditional private school subsidies, Education Savings Accounts, and private school tuition tax credits—are diversions of public funds to private and religious schools. Efforts to implement and expand voucher programs in states across the country are key to the relentless and enduring campaign to defund and then privatize public education, a movement that also includes manufacturing mistrust in public schools and targeting educators and their unions.
Tech and outsourcing companies continue to exploit the H-1B visa program at a time of mass layoffs: The top 30 H-1B employers hired 34,000 new H-1B workers in 2022 and laid off at least 85,000 workers in 2022 and early 2023
- The H-1B visa program was created to fill labor shortages in professional fields and could be a valuable temporary work visa program, but new data show it is being subverted by employers that are not facing labor shortages and by outsourcing firms.
- H-1B use is overly concentrated among a small number of employers. In 2022, the top 30 H-1B employers hired more than 34,000 new H-1B workers, accounting for 40% of the total annual cap of 85,000.
- The top 30 companies also laid off, or will imminently lay off, at least 85,000 workers in 2022 and the first quarter of 2023.
- Thirteen of the top 30 H-1B employers were outsourcing firms that underpay migrant workers and offshore U.S. jobs to countries where labor costs are much lower.
- Laid-off H-1B workers, who likely number in the thousands, must find a new employer to sponsor their visa within 60 days after their layoff or they may be forced to leave the United States.
- President Biden should use executive authority to fix the H-1B program and implement new rules that raise wages for migrant workers and prevent outsourcing companies from exploiting the H-1B program.
The H-1B program is the largest U.S. temporary work visa program, with a total of approximately 600,000 workers employed by 50,000 employers. The program’s intent is to allow employers to fill labor shortages for jobs that require a college degree, by providing work authorization for migrant workers in fields like accounting, journalism, health and medical, and teaching. Most H-1B workers, however, are employed in occupations like computer systems analysis and software development.
Visas for new workers are capped at 85,000 per year, but many employers are exempt from that annual cap, including universities and their affiliated nonprofit entities, nonprofit research organizations, and government research organizations. Approximately 130,000 temporary migrant workers will receive new H-1B visas each fiscal year to begin new employment for capped and cap-exempt employers, with another 300,000 receiving renewals (which are not subject to the cap). Every April 1, the government decides, via lottery, which employers will receive the 85,000 new visas subject to the cap.
The end of the pandemic public health emergency largely doesn’t change how state and local governments can use ARPA fiscal relief funds
Last week, Congress passed H.J.Res.7, a resolution that formally ends the public health emergency declared at the beginning of the COVID-19 pandemic. This termination is effective as of today—April 10, 2023—and signals the end of certain programs put in place in the past three years, including important measures related to Medicaid and health insurance.
However, the resolution will largely not affect the ability of state, local, territorial, and tribal governments to spend the close to $200 billion in unspent State and Local Fiscal Recovery Funds (SLFRF) allocated by the American Rescue Plan Act (ARPA). State and local governments will still be able to use remaining SLFRF dollars to make transformative investments to enhance equity and support working families and communities.
Below, EPI president Heidi Shierholz shares her insights on the jobs report released this morning, which showed 236,000 jobs added in March. Read the full Twitter thread here.
The unemployment rate ticked down to 3.5% in March—near a 50-year low—and all for good reasons. The labor force participation rate and the employment-to-population ratio both rose. 2/
— Heidi Shierholz (@hshierholz) April 7, 2023
THIS IS IMPORTANT: The labor market is strong, but it’s not “too hot.” We know this because wage growth is slowing. We can absolutely sustain the kind of labor market tightness we are seeing today, if the Fed doesn’t stand in the way (or hasn’t already). 4/
— Heidi Shierholz (@hshierholz) April 7, 2023
Even with today’s slowdown, profit growth remains a big driver of inflation in recent years: Corporate profits have contributed to more than a third of price growth
As strange as this might sound, the actual economic cost of inflation is often hard to identify. One might think that it’s obvious that if inflation rises from 0% to 5% then the purchasing power of “real” incomes (nominal incomes adjusted for inflation) throughout the economy has fallen by 5%.
But that’s not right—or at least it’s not right without some further specification about just whose income has fallen. The “circular flow” diagram that is in chapter one of most macroeconomic textbooks highlights something profound: one person’s cost is another person’s income. So, when the price of eggs rises by 30%, that extra money out of shoppers’ pockets doesn’t disappear into thin air, instead it lands someplace. In the case of eggs, that someplace could be in chicken farmers’ incomes, or the profits of middle-men brokers, or the profits of grocery stores.
There are times when inflation really can be driven by most incomes in society rising at mostly the same pace. In this case, inflation is distributionally neutral, but there’s also no “real” cost. For example, if inflation accelerates from 0% to 4%, but nominal wage growth accelerates from 2% to 6%, real wages haven’t been harmed. The inflation we’ve seen since 2021 has had profound distributional consequences. Prices and incomes for low-wage workers, middle-wage workers, high-wage workers, and profits have not moved in lockstep but have seen very different rates of growth.
Most striking is the role of profits in starting and sustaining inflation since 2021. Figure A below shows one measure of profit “mark-ups” in the non-financial corporate (NFC) sector of the U.S. economy. We look at this sector because it has rich and timely data coverage. Mark-ups are essentially profits earned per unit of output divided by labor and non-labor costs.
An average of 27 workers a day suffer amputation or hospitalization, according to new OSHA data from 29 states: Meat and poultry companies remain among the most dangerous
This is a guest post from Debbie Berkowitz and Patrick Dixon at the Kalmanovitz Initiative for Labor and the Working Poor, Georgetown University.
In January 2015, the Occupational Safety and Health Administration (OSHA) began requiring all covered employers to self-report all worker injuries severe enough to cause an amputation, the loss of an eye, or an overnight stay in the hospital. This requirement covers employers in 29 states under federal OSHA jurisdiction. (Employers in the other 21 states and Puerto Rico with State OSHA Plan agencies must report severe injuries to their state agency.)1
Updated data released by federal OSHA reveal that employers from the covered 29 states reported 74,025 severe injuries to the federal agency between January 1, 2015, and May 31, 2022. That amounts to a stunning 27 workers a day, on average, suffering among the most severe work injuries in just over half the states.
Gender wage gap widens even as low-wage workers see strong gains: Women are paid roughly 22% less than men on average
Last week, we released the latest State of Working America Wages Report, which highlighted historically fast real wage growth for low-wage workers between 2019 and 2022. Even after taking into account higher inflation, the 10th percentile hourly wage grew 9.0% over that three-year period, significantly faster than at an equivalent point from any other business cycle peak in recent history.
This tremendous wage growth occurred because policymakers took a different path in the pandemic recession and passed vital relief and recovery measures at the scale of the problem, which created a strong labor market. Unfortunately, despite this recent period of growth, wage levels for U.S. workers at the bottom of the earnings distribution remain low, making it difficult to make ends meet in any county or metro area.
While low-wage workers experienced welcome gains, we were surprised to find that the gender pay gap widened, even though women are disproportionately more likely to be lower-wage workers. We found that the gender wage gap grew across three measures: the median, the average, and a regression-adjusted average (i.e., controlling for age, race/ethnicity, education, and geographic division). Here, we delve deeper into the question of what happened to women’s wages vis-a-vis men’s over the last three years as well as the large wage gaps that remain across educational attainment and are worse for Black and Hispanic women.
The gender wage gap
Between 2019 and 2022, the gender wage gap remained stubbornly large even as lower-wage workers experienced gains. Women, on average, were paid 20.3% less than men in 2019. By 2022, that gap widened to 22.2%. Similarly, the regression-adjusted wage gap, which has been stagnant for most of the last 20+ years, widened slightly from 22.6% to 22.9%. Much of the growing wage gap at the average (unconditional and regression-adjusted) is driven by men’s higher wages and faster wage growth at the top of the wage distribution. When we look instead at wage growth at the middle of the wage distribution—the 40th to 60th percentiles—a different story emerges. In 2019, these middle-wage women were paid on average 16.2% less than middle-wage men. In 2022, that wage gap narrowed to 15.4%, a small but promising move in the right direction.
Employers regularly engage in tactics to suppress unions: Examples at Starbucks, Amazon, and Google illustrate employers’ anti-union playbook
The U.S. labor movement has seen a resurgence in union activity in recent years. In 2022, more than 16 million workers were represented by a union—an increase of 200,000 from 2021. Union election petitions with the National Labor Relations Board (NLRB) increased by 53% during fiscal year 2022, the highest single-year increase since fiscal year 2016. Further, unions saw their highest approval rating in more than 50 years.
Despite this resurgence, the current unionization rate (11.3%) is well under half what it was roughly 40 years ago. This is because of decades of attacks on the right to organize and, increasingly, employers’ use of “union avoidance” consultants, including in response to recent union organizing campaigns at Starbucks, Amazon, and Google. These campaigns—illustrated below—are representative of employer response and hostility toward workers attempting to organize.
State and local governments have spent less than half of their American Rescue Plan fiscal recovery funds: Recovery funds should be used to rebuild the public sector
On March 13, the U.S. Treasury Department released data and an interactive dashboard showing how state and local governments have been using the $350 billion in State and Local Fiscal Recovery Funds (SLFRF) appropriated by the American Rescue Plan Act (ARPA). These funds have fueled transformative investments and contributed to a strong recovery from the pandemic recession, and state and local governments should use their remaining SLFRF allocations to rebuild the public sector and support working families.
SLFRF spending by state and larger local governments (cities and counties with a population over 250,000) totaled just over $114 billion by December 31, 2022, an increase of $13 billion in the final quarter of the year. Six states—South Carolina, Oklahoma, Missouri, Tennessee, South Dakota, and Mississippi—have spent less than 10% of their funding. All six have Republican governors and Republican majorities in their legislatures.
One of SLFRF’s main purposes was to allow states to restore their public-sector capacities quickly. There were 376,000 fewer public-sector workers in February 2023 than three years earlier. States should be using their SLFRF dollars to fill open positions and retain experienced employees by increasing the compensation of public-sector workers, one-third of whom are paid less than $20 an hour.
Evidence suggests states that have chosen to invest larger shares of their SLFRF dollars are having greater success in recruiting and retaining state employees in a highly competitive job market. As seen below, states that have spent less than 30% of their SLFRF allocation have seen their state government workforces recover more slowly compared with those that have spent over 30%. States, therefore, have an excellent opportunity to spend their recovery funds in rebuilding the public sector and restoring public services.
The debate over the Federal Reserve’s proper course of action for the rest of 2023 was getting a little stagnant in recent months. The argument centered on whether inflation’s persistence was really a sign of an overheated economy that still needed cooling or if it was due to stubbornly large—but dampening —ripples stemming from the huge pandemic and war shocks of previous years. The recent failures of Silicon Valley and Signature banks and chaos in other corners of the banking sector definitely provide a new twist to this debate.
My view on what the Fed should do now in the wake of banking failures is relatively straight-forward:
- Before the Silicon Valley Bank (SVB) failure, it was already clear that the Fed should pause interest rate hikes at this week’s meeting, based largely on consistent deceleration of nominal wage growth.
- The SVB failure and subsequent banking turmoil are far more likely to be demand-destroying events than not. If one thought the Fed already should be reducing the pace of their rate hikes (or even pausing entirely) due to labor market cooling, the fallout from SVB just means this cooling will happen more quickly and hence the case for halting further rate hikes is stronger.
- It is a genuine problem that interest rate hikes of nearly 5% in a year cause this much distress in the financial sector, indicating a clear failure of bank management and supervision. These failures should be addressed going forward. But they exist today and the fallout of them clearly provides another argument for standing pat on further rate increases.
Why ‘right-to-work’ was always wrong for Michigan: Restoring workers’ rights is key to reversing growing income inequality in Michigan
The Michigan state legislature is poised to make history this week by repealing an anti-union “right-to-work” (RTW) statute enacted in 2012. This repeal is an important step toward empowering workers to address historic levels of income inequality and unequal power in our economy, and would mark the first time a state has repealed a RTW law in nearly 60 years.
For decades, Michigan boasted the highest unionization rate in the country—and relatively higher median wages resulted for the state’s workers. In this blog post, we find that as recently as 2005, Michigan’s unionization rate was 1.69 times the national rate, and the state’s median wage was 6% higher than the national median.
But after lawmakers passed RTW in 2012, Michigan’s unionization rates declined faster than in the nation as a whole, and the state’s relative median wage fell below the U.S. median. Attacks on Michigan workers’ rights have especially benefited the rich—declines in unionization rates have been accompanied by dramatic increases in income inequality, with half of all income in the state now going to the top 10%.
The repeal of RTW in Michigan—in tandem with Illinois voters approving a constitutional Workers’ Rights Amendment (which bans future RTW laws) in 2022 and Missouri voters overwhelmingly rejecting their legislature’s attempt to impose RTW restrictions in 2018—would also signal an important turning point after a decade of extreme anti-union state legislation in the Midwest that has suppressed wages and eroded job quality.
Two years later, American Rescue Plan funds are still a transformative resource: State and local governments—particularly in the South—should invest unspent funds in workers, families, and communities
The American Rescue Plan Act (ARPA) celebrated its second anniversary on March 11. In those two years, ARPA has supported a strong economic recovery and, through its provision of $350 billion in State and Local Fiscal Recovery Funds (SLFRF), allowed state and local governments to make transformative investments in their communities.
At the time of President Biden’s inauguration on January 20, 2021, the U.S. economy had recovered less than 60% of the 22 million jobs lost during the pandemic recession. Overall, 26.8 million workers—15.8% of the workforce—were either unemployed, out of work due to the pandemic, or employed but experiencing a drop in hours and pay. Additionally, key economic indicators suggested that the economic recovery had begun to reverse.
The American Rescue Plan Act was both a vital emergency measure that helped the nation through the worst of the COVID pandemic and a significant step toward addressing the nation’s economic inequalities. The $1.9 trillion package provided fiscal relief at the necessary scale to counteract the negative economic impacts of COVID. As a result, 2021 and 2022 saw the highest job growth of any of the past 40 years.
As ARPA enters its third year, state and local policymakers should use their remaining SLFRF dollars to rebuild public-sector workforces and support low-wage workers and their families. In particular, many Southern states have significant amounts of unspent funds, and workers, families, and underfunded public services could greatly benefit from the local economic boost SLFRF investments allow.
High and rising teacher vacancies coincide with a steep decline in the overall well-being of the teaching profession
In a recent EPI report investigating the national teacher shortage, we documented a large and growing number of teaching vacancies, which we linked to poor compensation and highly stressful working conditions. The data we assembled show that teacher pay has been falling relative to college graduates in other fields since 1979, and reported levels of teacher stress are comparable to other jobs that are typically recognized as being stressful, such as nursing or being a manager or executive. A recent working paper by Matthew A. Kraft and Melissa Arnold Lyon has similar findings after casting an even wider net over the data.
In their report, Kraft and Lyon examine four broad sets of indicators of the overall well-being of the teaching profession: professional prestige, interest in teaching, enrollment in preparation programs, and job satisfaction. They compile nationally representative time-series data and find compelling evidence of four distinct periods in the status of teaching over the last half century: a rapid decline in the 1970s, a quick rise in the early- to mid-1980s, no significant change over the next 20 years, and the start of a steep decline around 2010. Kraft and Lyon’s findings since 2010 are very similar to what we found: While the pandemic exacerbated challenges facing teachers, “most of these declines occurred steadily throughout the last decade suggesting they are a function of larger, long-standing structural issues with the profession.”
February jobs report shows a resilient but sustainable labor market: The Fed should not put the economic recovery at risk
Below, EPI economists offer their initial insights on the jobs report released this morning, which showed 311,000 jobs added in February and wage growth continuing to decelerate.
Below, EPI senior economist Elise Gould offers her initial insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS) for January. Read the Twitter thread here.
Job openings fell in January 2023, according to the latest #JOLTS data, while hires ticked up. Total separations were unchanged, but quits dropped slightly and layoffs increased slightly. https://t.co/dXEZgZoGFw pic.twitter.com/KCWsAvuszp
— Elise Gould (@eliselgould) March 8, 2023
The level and rate of hires ticked up in January, not surprising given the strong job growth in the payroll survey. Total separations held steady, while layoffs rose and quits fell. Both are key indicators to watch in coming months as measures of workers’ economic security. pic.twitter.com/x9HkXq5gBo
— Elise Gould (@eliselgould) March 8, 2023
We are still living in the aftermath of 2020’s overlapping crises of racial injustice, our nation’s polycrisis. Between the emergence of the COVID-19 pandemic, the ensuing economic recession, and the public police murder of George Floyd, we saw a harsh truth about the structure of American political economy: White supremacy has shaped our institutions such that their outcome is consistent Black precarity and premature death.
This confluence of tragedies brought awareness of the Black American condition to a new generation. It also reinvigorated interest among academics and policymakers to finally do something about the problem of racial disparities (though activists and community organizers largely never lost interest in this).
This renewed awareness and interest in addressing racial disparities brought attention to arguably the only structural solution to persistent Black-white economic and social disparities, one that we have put off as a country for generations: reparations for slavery, Reconstruction, Jim Crow, and mass incarceration.
The Supreme Court is poised to strike down affirmative action and student loan forgiveness: These decisions would threaten college enrollment and completion for students of color
In the wake of the appalling decision to overturn Roe v. Wade, the Supreme Court is yet again at the forefront of repealing sweeping legislative precedent that will change the lives of millions of Americans. Following arguments from Harvard University and the University of North Carolina on whether race-conscious admission programs are lawful, the Supreme Court is expected to overturn affirmative action in college admissions later this year.
Similarly, the Supreme Court will hear arguments later this month over President Biden’s student loan debt relief plan that would forgive at least $10,000, and up to $20,000, for tens of millions of federal student loan borrowers. The Supreme Court will likely strike down the plan.
Both affirmative action and student loan debt forgiveness are critical measures for college access and completion for students of color. Sadly, these statutes, along with many others, have been targeted and threatened within the courts over the years—leaving students of color to bear more acute barriers to higher education and more disparate socioeconomic outcomes.
The Economic Policy Institute recently published a fact sheet on illegal employer behavior during union election campaigns. Out of an abundance of caution, we are retracting the fact sheet due to inaccuracies with the underlying data. Instead, we refer readers to earlier research showing that U.S. employers are charged with violating federal labor law in four out of every ten union election campaigns.
EPI will update the data in a forthcoming report. We deeply regret the error.
Labor market off to a strong start in 2023: 517,000 jobs added in January as unemployment rate hits historic low
Below, EPI economists offer their initial insights on the jobs report released this morning, which showed 517,000 jobs added in January, the unemployment rate hitting a historic low of 3.4%, and wage growth slowing.
From EPI senior economist, Elise Gould (@eliselgould):
The labor market is off to a strong start this year with 517,000 jobs added in January, an unemployment rate at a historic low of 3.4%, and wage growth that continues to decelerate, slowing down to 3.7% at an annualized rate (down to 4.4% growth over the last year).
— Elise Gould (@eliselgould) February 3, 2023
Message to the Fed: Wage growth continues to decelerate no matter how it’s measured. These trends are not driving inflation. pic.twitter.com/94jmSRCWvR
— Elise Gould (@eliselgould) February 3, 2023
Not only was job growth in January stronger than anticipated, the revisions were larger as well. After benchmarking against UI records, total payroll employment for March 2022 was revised up by 568k jobs. Total establishment survey revisions increased December 2022 jobs by 813k! pic.twitter.com/hqk3KyytlH
— Elise Gould (@eliselgould) February 3, 2023
From EPI president, Heidi Shierholz (@hshierholz):
Important note! I wouldn’t normally be happy that wage growth is slowing, but the thing here is that *inflation is slowing much faster than wage growth is slowing.* That means real wages are rising, which is great news (this wasn’t happening in ’21 or the first half of ’22). 2/
— Heidi Shierholz (@hshierholz) February 3, 2023
Folks, over the period of slowing nominal wage growth of the last 10 months, the labor market has added 365,000 jobs per month on avg, and the unemployment rate is down to 50-year lows. It looks like the economy can have a soft landing, if the Fed doesn’t stand in the way. 4/
— Heidi Shierholz (@hshierholz) February 3, 2023
State and local governments have gained back less than 2/3rds of what they lost in the spring of 2022.
The gap in state & local jobs is a crisis, BUT IT DOESN’T HAVE TO BE. State & local governments can and must use their ARPA funds to raise pay and refill those jobs. 8/
— Heidi Shierholz (@hshierholz) February 3, 2023
On Friday, we will see the first labor market data for 2023. Along with the latest on payroll employment, unemployment, and wage growth, we will also get the final benchmark revisions for the establishment survey (CES). Preliminary benchmark revisions suggest job growth will be even stronger over the last two years than the 11.2 million previously reported. These benchmark revisions will be wedged back from April 2021 through March 2022, with the entire revision raising (or lowering) the level of jobs in March 2022 and consequently affecting subsequent job levels.
The Bureau of Labor Statistics (BLS) will also revise their industry classification system, which will result in about 10% of employment reclassified into different industries (mainly impacting detailed retail and information sectors). Friday’s jobs report will also include new population controls based on Census estimates for the household survey (CPS).
In addition to these important survey changes and annual benchmarking, the jobs report will show us where the economic recovery from the COVID-19 recession stands at the beginning of 2023. Taken together, the last two years of payroll employment growth have been remarkable. As shown in Figure A, the two years of job growth were the best in nearly 40 years.
This rapid recovery was not luck. Instead, it is the direct result of historic relief and recovery measures that matched the scale of the problem, like President Biden’s American Rescue Plan (ARP), which provided an essential boost with continued enhanced unemployment insurance benefits, aid to state and local governments, and the expanded Child Tax Credit.
The Fed should stand pat on further interest rate hikes at this week’s meeting: Inflation is easing even as the labor market remains strong
Inflation and all of its main drivers sharply decelerated in the last half of 2022. This was the case even though the pace of economic growth accelerated in the second half of the year and unemployment remained very low.
The Federal Reserve’s “dual mandate” is meant to balance the risks of inflation versus the benefits of fast growth and low unemployment. Right now, the benefits of low unemployment are enormous, and the risks of inflation are retreating rapidly. If the Fed lets the current recovery continue apace by not raising interest rates further at this week’s meeting, 2023 could turn out to be a great year for the economic fortunes of American families.
It is time for the Fed to stand pat on interest rate increases and wait to see how the lagged effects of past increases enacted in 2022 will filter through to the economy. Continuing to raise rates in the early stretches of 2023 will be a clear mistake and pose an unneeded threat to growth in the next year. In particular, the Fed should note the following:
Historic job growth in 2022 reflects strong but uneven economic recovery: State and local lawmakers should prioritize rebuilding the public sector in 2023
On Tuesday, the Bureau of Labor Statistics released state employment and unemployment data for December 2022, giving us a full picture of employment changes in the past year.
Nationwide, the U.S. economy added 4.5 million jobs in 2022, the second-strongest year for job growth in the past 40 years (after 2021), and a testament to the success of pandemic relief and recovery measures. Although the private sector has recovered quickly, public-sector employment—particularly in state and local government—remains weak. With billions of dollars in relief funds for state and local recovery yet to be spent, this is a once-in-a-generation opportunity to reimagine and rebuild the public sector. State and local lawmakers should seize it.
The debt limit is the world’s highest-stakes horoscope: Not raising the debt limit would guarantee a recession
U.S. Treasury Secretary Janet Yellen announced last week that the federal government had reached the statutory debt limit and that her department had begun “extraordinary measures” to meet required spending obligations. It is estimated that by July these extraordinary measures will no longer be able to keep some spending obligations from being missed.
The fact that the statutory debt limit can inject such chaos into the American political system and economy is truly odd. The debt limit measures nothing coherent and has no relationship to any serious measure of the economic burden imposed by the nation’s debt. It has as much relevance to the nation’s objective economic health as today’s horoscope. Yet if it’s allowed to bind, disaster would result. And if the price of convincing House Republicans to raise the debt limit is large cuts to federal spending, this still ensures grave damage to the economy and vulnerable families.
The debt limit—and particularly its relationship to the objective economic facts of the nation’s fiscal health—is poorly understood by too many. In this post, we make the following points about the debt limit in the current moment: