Black Americans are hiring much more rapidly in the wake of the pandemic shutdown than after the previous recession. Economists fear black workers will bear the brunt of the economic slowdown.
In March and April 2020, approximately 3.5 million Black workers lost or left their jobs. Within weeks, the unemployment rate for black workers soared to 16.8 percent, the same as he peaked after the 2008 financial crisis, while the unemployment rate for white workers was 14.1 percent.
Since then, the U.S. economy has experienced the fastest recovery in history, and that recovery is reaching workers of all races. Last month, the black unemployment rate was 6%, just above the record low of late 2019. Government data collected since the 1990s shows that wages for black workers are rising at the fastest pace in history.
Now policymakers in the Federal Reserve and the White House face the challenge of combating inflation without inducing a recession that undermines or overturns profits at work.
Decades of research have shown that racial and ethnic minority workers, along with those with other barriers to employment, such as disabilities, criminal records, or low levels of education, was fired first recession and last hired recovering.
William Darity Jr., a professor at Duke University who has studied racial disparities in employment, believes that the only credible tool the Fed uses to fight inflation — higher interest rates — works in part by causing unemployment. He says there is a problem with what he is doing. When borrowing costs rise, consumers are less likely to spend and employers are less likely to invest, reducing pressure on prices. But it also reduces demand for workers, boosting unemployment and lowering wages.
“I don’t know if there are any plausible existing policy options that don’t harm a significant portion of the population,” Darity said. “Whether it’s inflation or rising unemployment, it has a disproportionate impact on black workers.”
and Papers published last monthLawrence H. Summers, former Treasury secretary and chief economic adviser to Presidents Bill Clinton and Barack Obama, with co-authors, argues Fed needs to raise overall unemployment above 5% Did. 3.5% — controls inflation. The unemployment rate for black workers is usually about twice that of white workers, so the unemployment rate for black workers suggests he will approach or reach double digits.
Summers said in an interview that the results were disappointing and to some extent inevitable.
Mr. Summers argued: “But another way is to simply pretend that the U.S. labor market could remain so frenetic.”
The state of jobs in the United States
Much better-than-expected job growth in July suggests the labor market is not slowing down despite the Federal Reserve’s efforts to cool the economy.
“These discussions have nothing to do with how much you care about unemployment or how much you care about the unemployment of disadvantaged groups,” he continued. “They only need to make technical judgments.”
Many progressive economists were sharply critical of that view, arguing that black workers should not be collateral victims of the inflationary war. cautioned not to overestimate its ability to control inflation.
Black workers will suffer first in any Fed-induced recession, Mr. Spriggs said. When that happens, unemployment tends to continue across the board, he added.
In my June 2020 essay Washington Post When Attached research paperIn light of this, Jared Bernstein, now President Biden’s chief economic adviser, said the Fed “should consider targeting the black rate rather than the overall unemployment rate,” the increasingly popular I developed a certain discussion.
Federal Reserve policy implicitly treats 4% unemployment as a long-term target, but “black unemployment is twice the overall unemployment rate, so 4% for the economy as a whole.” Targeting would mean an 8% black unemployment rate,” he added.
The Fed did not take Bernstein’s advice. But in the years leading up to the pandemic, Fed policymakers increasingly spoke of the benefits of a strong labor market for racial and ethnic minorities, citing it as a factor in policy decisions.
After Biden took office, he and his economic advisers pushed a massive government appropriation bill that became a $1.9 trillion U.S. Recovery Plan. One reason is that it avoids the painful stagnation faced by job seekers, especially non-white workers. From 2007 he will instead bring a supercharged recovery after the 2009 recession.
“For African Americans, it’s going faster and stronger than any post-recession period since at least the 1970s,” Cecilia Rouse, chair of Mr. Biden’s economic advisory board, said in an interview. rice field. Black workers are seeing wage growth at a faster pace than other racial and ethnic groups, and are taking advantage of strong job markets to get higher pay, according to an analysis of government data shared with The New York Times by White House economists. are changing jobs in different industries and occupations. .
Mongen Jordan is in it. With a master’s degree in social work and earning a living from childcare training in February 2020, Covid-19 changed her life forever.
“The money, based on face-to-face professional development, went to zero almost instantly overnight,” she said. “I couldn’t pay the rent.”
But pandemic relief packages from the federal government have helped soften the blow of lost revenue. I sat down. He provided training and was paying about $13,000 more than he did for the pre-pandemic role.
Administration officials are optimistic that black workers will continue to see higher wages and better job opportunities, even if the labor market cools. echoed the view of the Fed, concluded that average wage growth for workers needs to fall further in order to be in line with the Fed’s inflation target.
Federal Reserve policymakers still have some hope that they can bring inflation down without triggering a recession or undoing the gains of the past two years.
Federal Reserve Chairman Jerome H. Powell has argued that only by keeping inflation under control can central banks create a sustainably strong labor market that benefits all workers. did.
“We all want the labor market back to what it was before the pandemic,” Powell said. press conference last month“It won’t happen unless we restore price stability.”
Some in the financial industry have called for a smaller rate hike, concerned that the Fed has underestimated the ultimate impact of its actions so far. David Kelly, chief global strategist at JP Morgan Asset Management, believes inflation will be significantly lower anyway, as the pandemic’s remnants of government stimulus begin to fade and households lose money. We believe central banks should show more patience as savings dwindle further.
“The economy is basically at a standstill right now,” Kelly said, adding that officials “don’t need to go into a recession just to show how tough inflation is.”
Michelle Holder, a labor economist at John Jay College of Criminal Justice, likewise cautioned against “statistical fatalism” that halting labor force growth is the only way forward. Still, she said she was fully aware that under current policies, the trade-off between inflation and job creation is likely to continue, disproportionately hurting black workers. Rate hikes are the Fed’s primary tool, the hammer, and “the hammer sees everything as a nail,” she said.
Holder, who is black, recalled a recent dinner in Washington with “really high-level, all-white, progressive economists” and said that among many of his colleagues who wanted a positive near future, there was a “give-up.” He said he had an attitude. It shows semester results for people of color across the board, but stay “obsessed with using mainstream tools” and ask yourself, “What else could I do?”
Darity, a Duke University professor, argued that one solution would be policies to protect workers from recession, such as the federal government guaranteeing jobs to those who want them. Some economists support less ambitious policies, such as expanding benefits to help people who have lost their jobs in the recession. But it is highly unlikely that Congress will take either approach or come to the rescue again with a massive bailout. Especially given the criticism from many Republicans and some prominent Democrats that excessive aid to the pandemic contributed to today’s inflation.
“The tragedy is that if the next recession hits, our administration will not be able to help the families and individuals who need it,” Holder said.
Morgani Brown, 24, lives and works in Charlotte, North Carolina. We have seen a modest but meaningful improvement in job quality that many black workers have experienced since the initial pandemic recession. She left her service aircraft cleaning job at Jetstream Grand at Douglas International Airport in Charlotte last year. But half a year ago, her work became more attractive.
“I signed up for Jetstream again because I saw they were paying more for $14,” she said. She continued to be frustrated with some working conditions, but she said things “eventually got better”.
With rent rising, she’s saving up to live with her boyfriend, who works at Amazon’s fulfillment center, and another friend.Ms. Brown, who is about to give birth, said that the e-commerce giant recently cut its workforce(Amazon officials said on a recent earnings call that the company “quickly transitioned from understaffing to overstaffing.”)
Ms Brown said she and her roommate hope their jobs will survive the recession. However, she began hearing more and more rumors that people she knew had been laid off or fired.
“I don’t know exactly why,” she said.