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Improvement in the black unemployment rate could be short-lived

The employment rate among blacks has improved significantly over the last three months as the economy approaches what’s known as full employment. But the hiring improvement might be temporary based on historical trends.
The employment rate among blacks has improved significantly over the last three months as the economy approaches what’s known as full employment. But the hiring improvement might be temporary based on historical trends. Bloomberg

Over the last three months, an eye-opening trend has appeared: African-Americans are making notable gains in U.S. jobs.

During that span, the unemployment rate for whites has held flat at 4.7 percent. But for blacks, it’s fallen from 10.4 percent to 9.6 percent, hitting single digits for the first time in the recovery. Meanwhile, the gap in labor force participation between blacks and whites has grown narrower than it’s been since September 1999. Since February, the number of blacks with jobs has gone up by 407,000. The number of whites with jobs has declined by 273,000, in part, no doubt, because of a wave of baby boomer retirements.

The numbers cover a small sample size and undoubtedly include some noise. But they also point to an often overlooked aspect of America’s racial divide: When the economy reaches the final stage of a recovery — as the country reaches full employment — African-Americans tend to see a sudden improvement more dramatic than the rest of the country. And that’s what’s happening now, according to economists, who say that tight employment is the best way to bring down the black joblessness rate.

But there’s also a depressing truth behind this. Blacks see greater gains during good times because they fall so far behind in bad times. Since the aftermath of the civil rights movement, African-American unemployment rates have remained almost twice as high as those of whites, no matter what else is going on in the economy. The unemployment rate today for both blacks and whites is nearly identical to what it was in 2008 and 1972. Unless we’ve broken from a decades-long pattern, African-American unemployment levels will take two steps down only for as long as white unemployment levels take one.

The reasons for this so far intractable gap run deep. Education is a partial factor but not the major one. (College-educated blacks, for instance, have twice the unemployment rate of college-educated whites.) Lingering discrimination plays a role. So do the hiring obstacles facing those with criminal records. Labor Secretary Thomas Perez noted last week in an interview that recent tensions in Baltimore and other urban areas were linked to what he called the over-incarceration of African-Americans.

“One of the greatest challenges of getting people into jobs in Baltimore city is the reality that so many people have a criminal history,” he said.

Undoubtedly, some of America’s visible racial tension over the last year stems from the economic pain of the Great Recession, when black unemployment levels hit their highest point since 1984.

Though there is some uncertainty about the strength of the recovery, most economists say the nation is now near — but not quite at — full employment, the magic point at which employers must lift wages to attract and keep workers because so many have been pulled in from the sideline. During a long period of full or nearly full employment from 1995 to 2000, black unemployment fell as low as 7.3 percent. Valerie Wilson, director of the Economic Policy Institute’s Program on Race, Ethnicity and the Economy, notes that wages increased more rapidly during this period for blacks than for whites.

One question hanging in the background is whether the U.S., as it reaches full employment, will be allowed to stay there. The Federal Reserve has indicated that it will lift interest rates from near zero if it sees evidence of economic strength. Raising rates will put the recovery on “normal” footing — interest rates were above 5 percent for much of the 1990s — but it could also trip up the labor market, raising the cost of borrowing for businesses.

“It’s not just getting to full employment that helps minority workers,” said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities. “It’s getting there and staying there.”

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