Inflation, soft jobs market challenging vulnerable workers

Persistent inflation and a now sluggish job market has the potential to further challenge some vulnerable groups, particularly low-to-middle-income (LMI) families and out-of-school black and Latino youth (ages 16-24 with a high school diploma and no education). collectors). Late adults’ labor force correlations are usually weaker than those of the general population and their white peers, and their employment outcomes also tend to be more sensitive to changes in the economy.

This blog post has two goals:

• First, examine the data from the US Census Bureau Family Pulse Survey To measure the ability of Black and Latino households and LMI to make ends meet. This is an important consideration given the persistently high inflation that households face.
• Second, it expanded on a November 2024 blog post that focused on labor market outcomes for out-of-school youth. At that time, we found that the ratio of employment to the out-of-school youth population has declined since employment began to decline and since the Federal Open Market Committee (FOMC) began raising its policy rate — the target range for the federal funds rate — in March 2024 to fight inflation.

inflation pressure

Inflation – as measured by the Personal Consumption Expenditure Price Index – remains well above the FOMC’s 2% target, but has been trending downward year-on-year since June 2024. However, wage growth still hasn’t kept pace with inflation. How might this dynamic vary by race, ethnicity, and income?

To answer this question, we looked at the US Census Bureau’s Household Pulse Survey. As of March 2023, Black and Latino households had the highest rates of difficulty meeting typical household expenses, which include food, mortgage or rent, car payments, medical expenses, and student loan payments. Nearly 50% of Black and Latino families found it “somewhat difficult” or “very difficult” to make ends meet. This contrasts with 34% of white families and 32% of Asian families. All percentages were higher than they were 12 months ago.

It should also be noted that the rate of difficulty meeting household expenses was higher across all segments of the household income distribution compared to March 2024 and March 2024. However, low-income households (those making less than $50,000 per year) were still experiencing the most difficulty paying. their usual household expenses.

We also examined the intersection of race, ethnicity, and income. For families with an annual income of less than $50,000, about 60% of Black and Latino families reported difficulty making ends meet. Also of note, nearly 52% of low-income white households reported difficulty making ends meet for their usual household.

labor market pressure

Since the beginning of 2023, job opportunities and employment rates have been trending downwards. Although initial claims for unemployment insurance benefits are still very low, they have been up over the past three months.

The latest Bureau of Labor Statistics (BLS) employment report also indicated slowing job growth. In March, non-farm payrolls increased by 236,000, while it had expanded at an average monthly gain of 334,000 over the previous six months.

Employment-to-population ratios of the BLS indicate continued stability in US employment. However, the aggregate nature of the published data may make us miss the increased vulnerability among vulnerable groups, especially youth with less education and fewer job skills.

As noted in previous blog posts, the Institute for Economic Equity defines vulnerable groups as follows: young adults (ages 16-24), all adults who have not passed a high school diploma, black men and black women, white women, Hispanic men and women Latinas.

Other groups and communities that face systemic and structural barriers include out-of-school youth, people with disabilities, American Indians, and Alaska Natives. For this blog post, we also include rural workers and workers who live in core urban areas.

Has the job slowdown worsened for out-of-school youth?

Why focus on vulnerable workers such as out-of-school youth? They can be thought of as the canaries in a coal mine: in the context of the labor market, they are often the first to suffer job losses and cutbacks in hours when the economy slows and the last to benefit fully from sustained economic growth. A one percentage point change in the overall unemployment rate has a greater impact on labor market outcomes for these workers than for the workforce in general.

To assess whether the slowdown has worsened for vulnerable groups, we looked at the cumulative percentage-point change in the employment-to-population ratio for each vulnerable group since February 2024. Our previous blog post estimated changes from February 2024 to August 2024 and found that the employment-out-of-youth population share decreased school by 1.8 percentage points. The largest decline was among out-of-school black youth, followed by out-of-school Latino youth.

The data presented here extends the employment-to-population ratio analysis to February 2023. The following figure shows how out-of-school youth and some other groups have been affected by reduced employment opportunities and slower job growth; The groups below saw a downward trend in percentage when the November post was published.

Data extension (February 2024 – February 2023) changes the picture. In particular, employment-to-out-of-school youth ratios of Black and Latino youth showed a decline from February 2024 to February 2023 but not as severe as initially seen at the end of last summer.

Specifically, the proportions of Black and Latino youth decreased by 0.5 and 1.5 percentage points compared to a decline of more than 5 percentage points for both groups through August 2024.

What is the source of the decline in the employment-to-out-of-school ratios of young Black and Latinx young adults? Is it associated with longer job search (higher unemployment rate) or exit from the labor force (lower labor force participation rate)? The following two charts show the cumulative changes from February 2024 to February 2023 in the unemployment and labor force participation rates.

From February 2024 to February 2023, the decline in the employment-to-population ratio of out-of-school black youth as shown in Chart I, based on Charts II and III, appears to be more related to exit from the labor force than to an increase in the number of unemployed . The group’s unemployment rate increased by just 0.03 percentage point from February 2024 to February 2023, while the labor force participation rate fell by 0.5 percentage point.

The decline in the employment share of the out-of-school Latino adult population from February 2024 to February 2023 is due to the 3.6 percentage point jump in their unemployment rate. This coincides with a 1.4 percentage point increase in this labor force participation group. This double increase in unemployment and labor force participation may indicate that the slowing national labor market is less able to absorb young Latinos looking for work. If this pattern continues, within several months we could see their labor force participation rate drop.

Young adults out of school also have lower earnings

Finally, out-of-school youth also face the pressure of earning less on average than other workers. The average inflation-adjusted hourly wage (February 2023 dollars) for all workers from March 2024 to February 2023 was $24.87 per hour. The average for all out-of-school youth was $15.34 an hour.

Out-of-school black youth had the lowest real average hourly earnings among all groups of vulnerable workers, at $14.50 an hour. Among the groups for which estimates were made, rural out-of-school youth averaged $15 an hour, the second-lowest of all out-of-school youth. Hispanic youth out of school earned an average of $15.64 an hour, slightly higher than the general average for undocumented youth.

Overall, the Census Bureau’s most recent BLS Jobs Report and Household Pulse Survey indicate shrinking economic prospects for LMI families and out-of-school youth. One source of stress comes from the continuing difficulty in making ends meet for the family. The other comes from the consequences for vulnerable workers in the current labor market. If pressures persist, these workers, their families and communities may become more vulnerable and unable to meet family financial obligations.

notes

1. For more Detailed labor force statistics from the current population surveysee BLS.
2. to look at College enrollment and work activity for high school graduatessee this version of BLS.
3. to look at Workforce Characteristics of Persons with Disabilities (PDF)see this version of BLS.
4. BLS mentioned it The unemployment rate for American Indians and Alaska Natives was twice the national unemployment rate in 2019.
5. The employment-to-population ratio is equal to the labor force participation rate multiplied by the quantity 1 minus the unemployment rate.
6. The authors calculate using exact data for households in the Census Bureau’s monthly current population survey. All means are weighted.