Black Unemployment Matters Just as Much as White Unemployment

In April 2020, after the labor market took its largest one-month hit in modern history, Black men and women suffered job losses proportionate to those of white women. Still, their losses were far less severe than those of Hispanic men and women. Black workers already had higher unemployment rates, as has always been the case, but their unemployment rates did not skyrocket as much as other groups. In fact, while the Black unemployment rate normally hovers around two times higher than that of whites, the racial disparities in the unemployment rate fell during the height of the coronavirus crisis.

Black job losses were not as extreme as might have been expected because Black workers were overrepresented in the sectors deemed essential. Yet, since April 2020, the ratio of Black to white unemployment has been on a path to return to its typical level — with Black workers experiencing twice the level of unemployment as their white neighbors.

There are good reasons for both central bankers at the Federal Reserve and policymakers in Congress to not complacently slip back into tolerating these disparities as an acceptable facet of economic normalcy.

Many economists I know quietly think that the employment gap highlights the problem of longstanding strains in the Black community. Not long ago, the Federal Reserve based its policies on a mechanical rule about inflation risk and the level of unemployment, which led central bankers to slow down the economy whenever the overall unemployment rate falls below about 6 percent. As a consequence of this mentality, every month from September 1975 to June 1997 the Black unemployment rate was in the double digits.

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Economists have tried to rationalize this disparity by saying it merely reflects differences in skill levels. Whether said explicitly or implied, the gap is explained by Blacks simply having fewer skills and hence lower levels of employment. But the skills hypothesis is too strained at this point to be believable: The unemployment rate for white high school dropouts is almost always below that of Black unemployment over all, averaged across all education levels. Why would white people who did not finish high school always have lower unemployment rates than Blacks, even as Black people increased their levels of educational attainment?

Fast-forwarding to these months of the pandemic recovery since April, the unemployment rate for white high school dropouts has been below that of Blacks who have associates degrees. Only last month did the Black unemployment rate fall below the unemployment rate for high school dropouts of all races. (And it was always difficult to explain why the Black unemployment rate was higher than the Hispanic unemployment rate, given Hispanic educational attainment does not exceed that of Blacks.)

In the last few months, Black workers who have been sidelined have returned to active job searches. In the last two months, the Black unemployment rate has been going up because the increase in those looking for work has been much bigger than the success rate at which Black workers are finding jobs. Despite record job openings reported in the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, employers are not welcoming Black workers with open arms — they appear to be looking past them.

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The result has been a steep climb in long-term unemployment for Black workers — still the last hired, as the saying goes. At the labor market’s current pace, the United States is likely to get back to prepandemic employment levels by late fall 2022. That would be a long time for the long-term unemployed, of course, and another slow recovery for the Black unemployment rate.

Asian Americans are also suffering from long-term unemployment, with jobless spells that are actually somewhat worse than that for Black workers. And, like Black workers, this is true even for highly educated Asian American workers — a clue that weak job networks and social discrimination are issues plaguing both groups.

Many classically trained economists do not like racial discrimination as an explanation for these gaps, because their models don’t account for it and they also can’t imagine policy fixes for it. This approach ignores historical evidence that discrimination in the labor market can be obstructed. The rapid wage gains that Black men made relative to white men from 1946 until the late 1970s showed that the pro-labor mind-set of institutions at that time mattered.

In addition to union-friendly policies and higher rates of union membership of Black men, there was the imperfect but new inclusion of Black workers who had been excluded from the protection of the nation’s minimum wage laws to the federal and unprecedented inclusion of Black workers in key mainstream workplaces aas well as in the federal public sector.. The progress culminated in the Civil Rights Act of 1964, which finally abolished legal discrimination in hiring and pay. Since the Ronald Reagan era, however, pro-labor and anti-discrimination policies have fallen out of favor (at least until very recently). So, wage gains stagnated.

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Heather Boushey, who is now on the Council of Economic Advisers, is among the senior economists in the Biden administration who better understand the pay gap in this manner, and its relationship to enduring, heightened Black unemployment. And the Federal Reserve seems to now understand, according to its new, more worker-friendly framework, that there are a lot more people of all colors left on the sidelines who can be employed without igniting inflation than previously understood: Ignoring the Black unemployment rate isn’t just a moral issue, it ignores potential growth for the economy.

There will be doubters in the months to come, but the misdiagnosis of the past few decades is a dangerous one that we ought not repeat — for our economy, and the lives of real people.

William Spriggs is a professor in the department of economics at Howard University and serves as the chief economist to the A.F.L.-C.I.O.

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