Racial disparities in labor market outcomes examined

A new commentary from a senior policy analyst at the Federal Reserve Bank of Cleveland examines the extent to which disparities exist between Black and whites in labor market outcomes such as levels of labor force participation, unemployment rates, and earnings. Economic inclusion trends have been studied at the national level, but this commentary takes a look at how those disparities vary within and across states with a specific look at the Fourth Federal Reserve District states of Kentucky, Ohio and Pennsylvania.

Relying on monthly data from the Current Population Survey (CPS), the Fed analyst, Kyle Fee, examined differences in state-level outcomes for Blacks and whites in the employment rate, the labor force participation rate, the unemployment rate, and real median hourly earnings. He found that states generally mirror national trends, but the degree of economic inclusion varies over time and across states. For instance, the national black and white (BW) gap in employment shows cyclical behavior where the gap increases during a recession, peaks once the recession ends, and slowly declines during expansions. In 2007 before the Great Recession, the national BW employment gap was 9.2 percentage points, peaked in 2011 at 11.8 percentage points, and then gradually declined to 6.3 percentage points in 2019. In 2020, it grew again to 8 percentage points.

Fee notes that disparities in employment, unemployment, and labor force participation rates have fluctuated since 2000, while gaps in earnings point to increasing disparity between Black and white workers. Unlike the cyclical patterns seen in employment, unemployment and labor force participation, Fee found that the national BW gap in earnings has steadily increased since 2000. In 2000 that gap was $3.16 and in 2018 it peaked at $4.64 and had declined to $3.94 in 2020. Fee states that the BW gap from 2000 to 2020 was a result of real median earnings for whites increasing more than for Blacks during the period.

Fee writes that the gaps in economic inclusion widen during recessions and narrow during expansions, due largely to greater movement in the Black labor market experience as opposed to the white labor market experience. However, he says further research is needed to provide a better understanding of why states’ labor market outcomes differ by race. The full commentary and link to the data is available here.