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February 2023 US Labor Market Update

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Special Edition

Radancy’s US labor market update this month will be a special edition for Black History Month. The ability of all individuals to access opportunities is a necessary component of an inclusive economy whereby people develop social capital. Social capital is in reference to job opportunities created by career networking and sponsorship that will lead to an economic trajectory of an improved quality of life for current and future generations.

Black or African American job candidates face a variety of challenges in the labor market, specifically elements of the human capital lifecycle which include recruiting and retention. From the recruiting perspective, biased AI screens resumes based on incorrect or distorted information. Ample data and research have shown that resumes which contain Black- or African American-sounding names are less likely to receive a callback from an employer in comparison to resumes with white-sounding names. From the retention perspective, Black or African American job candidates experience obstacles in their career progression due to lack of corporate sponsorship or accessible networking and career opportunities and are less likely to stay in one place of employment compared to their non-Black colleagues.

Access to opportunities is one of the strongest predictors of determining long-term economic success, outweighing formal education or years of experience.

Wealth Inequality is More Evident as Income Rises

The most recent data from the US Census Bureau paints a stark contrast of income distribution in the US between Black people and white people. Of all Black Americans, 11.3% make less than $10,000 in comparison to 4.3% of white Americans. Wealth inequality is more evident as income rises.

The share of white people with incomes higher than $50,000 exceeds that of Black people at every subsequent income level. An inclusive economy where there are opportunities for Black Americans and other people of color would be one of many ways to reduce income inequality.

US Labor Market Continues to Remain Tight

US job openings increased from 10.4 to 11.0 million over November to December, an increase of 5.5% MoM, however an increase of 3.0% over the past three months is indicative of a tight labor market which has made it an ongoing challenge for employers to find and hire talent. There were 5.2 million more job openings than workers available, a slight increase from the previous month of 4.7 million.

Headline Unemployment Slightly Decreased Overall Indicating a Relatively Tight Labor Market

The headline unemployment rate (U-3) decreased slightly from 3.5% to 3.4% over November to December. In terms of race and ethnicity, Black or African American was the only race/ethnicity who experienced a decline in unemployment MoM, YoY and over the past three months in comparison to white, Asian and Hispanic or Latino.

In terms of additional measures of labor slack, the labor force participation rate increased from 62.3% to 62.4% over November to December. In terms of race and ethnicity, Black or African American was the only race/ethnicity who experienced an increase in labor force participation rate MoM, YoY and over the past three months in comparison to white, Asian and Hispanic or Latino.

US labor markets continue to experience slack or inefficiencies in the economy as the labor force participation rate remains 0.9 percentage points below pre-pandemic levels.

US Labor Market Tightness Measure Remains Elevated

The job openings to job seekers ratio, which is one of the measures used to assess labor market tightness, continues to remain elevated at 1.9 compared to the pre-pandemic level of 1.2. In a recent National Bureau of Economic Research (NBER) working paper, Lee et al Jan 2023 have shown that much of the current labor market tightness can be attributed to a decline in working hours among college-educated men. 

Job seekers are still in an advantageous position to find new opportunities and currently employed Americans are also able to consider alternative employment considering that the data shows job switchers over the past three months have made more than 1.5 times more than job stayers according to the Federal Reserve Bank of Atlanta Wage Growth Tracker.

High Gas Prices Impact Average Office Occupancy Rates and Driving Behavior

There is a negative correlation between gas prices and average office occupancy rates as evident by the high office occupancy rates in metros such as Austin, Dallas and Houston where average gas prices are significantly lower than compared to metros such as San Francisco, Los Angeles and San Jose.

High gas prices have impacted the way Americans have changed their behavior. According to the most recent US Census Household Pulse Survey, only 9.8% of Black Americans’ driving behavior was not impacted by the cost of gas in comparison to 68.5% of white Americans, which represents a factor of 7. High gas prices along with access to transportation remains a challenge for many Black Americans in terms of labor force participation.

According to the US Census Bureau, the share of Black Americans with access to cars who drove alone is 66.5% in comparison to the share of white Americans with access to cars who drove alone at 70%. Approximately 1.2 million Americans reported that access to transportation served as a barrier to entering the labor force according to the most recent US Census Bureau Household Pulse Survey. The Federal Reserve’s ongoing hawkish monetary policy of raising interest rates to reach a 2% inflation target has made the cost of borrowing increase, thus making it less affordable for American workers to purchase vehicles.

US Job Gains Remain Elevated

Total nonfarm payroll increased by 517,000 over December to January reaching 155 million, surpassing the 2019 average of 150,984. Employment gains were up in leisure & hospitality (+128K), professional & business services (82K), healthcare (+58K), however down in information (-5K).

Overall, the gains in jobs signal a tight labor market, as total nonfarm payroll has increased by 1.7% since the pre-pandemic days.

The most recent US Census Bureau Household Pulse survey asked 146 million Americans over January 4 to January 16, 2023, various questions regarding employment, healthcare and other topics. Among Black or African American people, 18.6% worked in healthcare, followed by 9.9% in manufacturing, and 8.9% in educational services. Healthcare represented the largest share by industry for all races and ethnicities, however industries such as information technology are represented by a large share of Asian American people, 15.7% respectively.

US Job Candidates by Race and Ethnicity

Radancy’s proprietary candidate survey experience data shows Black or African American job candidates consistently value convenience and getting ahead in their career MoM and YoY in comparison to white job candidates. Factors such as compensation and interesting and challenging work were considered less important for both groups in the period reported. According to a recent McKinsey study of Black talent tech workers, 83% of Black/African American tech employees indicated that advancement opportunities were among the top three most important factors which contributed to growth for tech talent among Black/African American employees.    

US Separations Increase MoM While Quits Decrease and Layoffs Increase   

Total separations – the summation of quits, layoffs/discharges and other separations increased by 1.0% from November to December despite the high level of job openings. Overall, layoffs/discharges increased MoM and the three past months by 3.5% and 10.5% respectively. Layoffs/discharges have impacted both blue and white-collared industries such as accommodation & food services and professional & business services; both industries that experienced the largest percent increase in layoffs/discharges over the last three months.

US Wages Continue to Remain Below Inflation

The percent change in average hourly earnings YoY exceeded the percent change in employment except for transportation & warehousing, where employment exceeded wage growth, while the percent change in employment and average hourly earnings remained the same for leisure & hospitality during the same period. Overall, wages remain below inflation as annual nominal wage growth is 4.4% compared to annual inflation, which is at 6.4%.

Real Wage Growth Among Black or African American People Lags Other Racial/Ethnic Groups

According to the most recently released data on median usual weekly real earnings, white people make more than 1.2 more per week in comparison to Black or African American people, while Asian people make more than 1.7 times more than Black or Africa American people. The data from 2022 Q4 reports however that Black or African American people make more than 0.9 times more than Hispanic or Latino people.

Over the past 22 years, real wage growth by race/ethnicity can be broken down into the following: Asian people 42.1%, Hispanic or Latino people 22.2%, Black or African American people 9.1%, and white people 8.1%.

Higher earnings translate into all facets of living including the ability to buy a home in a safe neighborhood with access to high-quality healthcare and education. Professor Raj Chetty of Harvard conducted groundbreaking research several years ago where he showed that upward mobility of individuals is determined by the zip code in which they reside.

Moving Forward

From the employer’s perspective, sponsorship programs are widely suggested solutions in helping employees from marginalized backgrounds reach higher levels of career progression, as well as building strong professional networks to further capitalize on their personal brand. According to the Harvard Business Review, 20% of white employees have sponsors compared to 5% of Black employees.

An inclusive labor market that considers everyone while promoting equity and efficiency is part of building a robust economy for all its people.

About Radancy

Radancy is the leading cloud-based talent acquisition software provider intelligently solving the most critical challenges for enterprises globally and delivering cost-efficient outcomes that strengthen their organizations. The Radancy Talent Acquisition Cloud, powered by rich data and deep industry insights, optimizes the entire candidate journey, enabling enterprises to hire the most qualified talent faster, while reducing costs and driving higher ROI, recruiter efficiency and an improved candidate experience.

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