Tight labor market reducing racial unemployment gap

One wants to be careful not to over interpret any jobs report, but when a number pops out that makes sense in terms of both theory and empirical evidence, it's legitimate to take note.

In this spirit, note that the African-American unemployment rate hit 6.8 percent last month, the lowest on record, with data going back to the early 1970s. In addition, the gap between black and white unemployment, measured as the black rate minus the white rate, hit 3.1 percentage points, also a record low.

True, 6.8 percent doesn't sound very low when the overall jobless rate remains at a 17-year low of 4.1 percent. Some of the persistent difference in employment is due to educational differences, but not as much as you might think. Similar differentials in black/white jobless rates exist for all education levels. Racial discrimination is alive and well and in play in the jobs gap.

But that key observation underscores my larger point: A persistently strong macroeconomy is highly potent medicine for treating economic inequities, including racial ones. It's not all that's needed, by a very long shot. Purging discrimination and unequal punishment from the criminal justice system, for example, is essential if we're ever to achieve racial justice. But it's not a coincidence that toward the end of his life, the Rev. Martin Luther King Jr. was pushing hard on a full-employment agenda.

The economics is straightforward. Discrimination is a "luxury" that employers who engage in it can't afford when the economy tightens up. You either hire someone you might avoid if the labor supply queue was longer, or you leave profits on the table.

What about wage growth? Not everything is rosy in the current job market. While wages are rising a bit faster than prices, their growth rate hasn't accelerated much at all, even as the job market has tightened. I'd expect to see more than we're getting on the wage side.

On the positive side, using data on real (inflation-adjusted) median hourly wages for black workers, I found for every point of closure in the jobs’ gap, the real black median wage goes up about a percent. That's not huge, but it's a move in the right direction.

And the combination of more work at even slightly higher pay will raise black incomes and lower black poverty. Again, hold the applause: the strong macroeconomy is helping to achieve but a small piece of racial economic justice. These wage and job gaps remain far too large, and the opportunities facing black families, from kids to adults, are still much too constrained.

But the policy implication is clear: the longer this expansion proceeds, the better chance minority workers have of claiming some of its benefits. For the Federal Reserve, soon under the new leadership of Chair Jerome Powell, the message is this: Especially given that inflation remains tame and well below the Fed's target, keep your hands off that punch bowl!

Jared Bernstein, a former chief economist to Vice President Joe Biden, is a senior fellow at the Center on Budget and Policy Priorities.







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