LOWER BLACK UNEMPLOYMENT RATE PARTIALLY DRIVEN BY INCREASED NUMBERS DROPPING OUT OF THE LABOR FORCE

The most recent Jobs Report caught more than few economic Cassandras by surprise. The labor market, so it seems, is pretty healthy: Between March and April, the economy gained more than a quarter of a million gigs (253,000) and the aggregate unemployment actually dipped a bit, trickling ever so slightly downward from 3.5% in March 2023 to April’s rate of 3.4%.

But what’s really grabbing the headlines—in addition to that 253,000 number, of course— is the reported drop in the Black unemployment rate. The Black unemployment rate, according to the statisticians at the Bureau of Labor Statistics (BLS), slid from 5.0% in March to 4.7% in April.

That 4.7%, we’re reminded, is the lowest the Black unemployment has been since the BLS began tracking this data in 1972.

And it’s way below the 16.8% peak we hit during the early months of the pandemic.

What’s more, between March and April, the White unemployment rate pretty much held steady, falling from 3.2% to 3.1%. As it currently stands, then, the Black unemployment rate is 1.5 times as high as their White counterparts, substantially down from the historical average of 2.

While the above data are certainly encouraging—and ought to be celebrated— there’s something embedded in the Jobs Report that suggest that the recent drop in the Black unemployment rate might not be all it’s cracked up to be.

INCREASED NUMBERS OF BLACK WORKERS DROPPED OUT OF THE LABOR FORCE

The most recent Jobs Report, for instance, estimates that sizes of the White and Black labor forces are 127,174,000 and 21,790,000, respectively. That same Report estimated the number of White and Black unemployed folks to be 3,950,000 and 1,025,000, respectively.

These unemployment rates are simply calculated by dividing the number of people unemployed by the size of the labor force and then, of course, multiplying the ratio by 100. Thus, the current unemployment rate for Whites and Blacks clock in at 3.1% (3,950,000/127,174,000) and 4.7% (1,025,000/21,790,000), respectively.

The reported declines in the White and Black Unemployment rates from 3.2% to 3.1% and 5.0% to 4.7%, respectively, could be the result of increased numbers of the unemployed of each group securing a gig.

But here’s what’s interesting—but often overlooked—in commentary on the recent Jobs Report: The number of White and Black persons who are in the BLS category of “not in the labor force” moved in opposite directions— that is, the number of Whites in that category dropped, while that of Blacks increased.

Why might that be a big deal?

Well, first of all, it’s useful to bear in mind what it means to be “not in the labor force.” When the BLS conducts its survey, it will, among other things, classify individuals as employed, unemployed, or not in the labor force. The labor force, then, consists of all the employed plus the unemployed, with the unemployed being all those folks who are jobless and actively searching for a gig.

So, if you’re neither employed nor unemployed, then you’re dropped in that “not in the labor force” bucket.

Remember—and I know this might sound bananas— as far as the BLS is concerned, being without a job does not mean you’re unemployed. You must be a) without a job and b) must be actively looking for a job (e.g., sending out resumes, pounding the pavement, scouring the internet for openings, and so forth).

For instance, if your boy—buddy— has been looking for a gig and, after constant rejection, gets so frustrated that he ceases actively searching, then as far as the federal statisticians are concerned, buddy is not unemployed; buddy is “not in the labor force.”

Or, if your girl—Mercedes— wants a job but is not actively searching because she can’t cough up enough coins to cover child-care, then as far as the number crunchers are concerned, she is not unemployed.

Like Buddy, she’s out of the labor force.

If people who are unemployed drop out of the labor force, then the measured or official unemployment rate will decline.

In other words—get ready for this— a decline in unemployment doesn’t always mean that more and more of the unemployed are finding jobs.

It can also mean, to reiterate, that some of the unemployed are not finding gigs but are actually dropping out of the labor force.

It can also mean, of course, that the decline is the result of a combination between some of the unemployed becoming employed and some of them falling into that “not in the labor force” bucket.

And if you look closely at the recent Job’s Report, one of the thing’s you’ll find is that between March and April, the number of Black folks “not in the labor force” increased by almost 400,000 (394,000). Most of these folks probably moved from the category of “unemployed” to that of “not in the labor force.” Because these folk are NOT counted as unemployed once they drop out of the labor force, the count of the unemployed would decline and, everything else being equal, the unemployment rate itself would drop.

This, by the way, stands in sharp contrast with what happened to White workers over the last thirty days:

The most recent Jobs Report shows that the number of Whites classified as “not in the labor force” actually decreased by 166,000. In other words, White workers moved in the opposition direction of that of their Black counterparts. They—Whites- moved from being “out of” to being “in” the labor force, with most of them probably moving into the category of “employed.”

The upshot is this: That reported decrease in the Black unemployment rate from 5.0% in March to 4.7% in April is at least partially attributable to the sizeable number of Black workers just dropping out of the labor force.

In all fairness, one month does not a trend make. These reports are volatile and are subject to revision.

But it does, I think, offer reason to pause: We can—and should—acknowledge the employment status of Black (and White) workers is far better than it was at the height of the pandemic, and far better than it would be if the forces of austerity and White nationalism were to trump (pun intended) the opposition.

At the same time, though, it’s way too premature to be out here running a victory lap.

Catch you on the flip side,

Doc Greene