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October Jobs Report: Ongoing strength in labor market has led to inclusive recovery

Analysis by Betsey Stevenson and Benny Docter
Contact: Benny Docter, bennydoc@umich.edu
Jeff Karoub, jkaroub@umich.edu

The labor market remains strong as industries that have lagged in the recovery continue to expand hiring. In October 2022, the U.S. added 261,000 jobs. While the rate of job growth rate has slowed from the fast pace of recovery in 2021 and early 2022, job growth remains well above the pre-pandemic average job growth of 164,000 jobs per month in 2019.

While the unemployment rate ticked up to 3.7% in October from 3.5% in September, the unemployment rate has bounced between 3.5 and 3.7% since March and remains near record lows. Record job openings continue to support hiring across a range of industries helping workers throughout the country return to employment. The recovery has been strong enough to benefit the most vulnerable workers, with low unemployment and recovered or recovering labor force participation among all groups of workers.

“After the passage of Coronavirus Aid, Relief, and Economic Security (CARES) Act and the American Rescue Plan, critics derided generous pandemic aid programs benefiting workers, unemployed people, and families. A key part of that argument held that support programs would weaken recipients’ attachment to the workforce. Instead this support helped fuel a rapid economic rebound that in turn has led to a nearly complete labor market recovery. Most importantly, pandemic aid prevented the type of long-term labor market scarring that occurred in the wake of the 2008 recession,” said Betsey Stevenson, economist at U-M’s Gerald R. Ford School of Public Policy.

Unemployment rates have returned to pre-pandemic levels for workers with all levels of education.

Unemployment rates have fallen for all education groups back to the historically low levels that occurred just before the pandemic began. Less educated workers faced steeper job loss in the immediate aftermath of the pandemic as they were more likely to hold precarious jobs with work that could not be done remotely. The unemployment rate for those without a college degree soared to 17.6% among high school graduates and 15.3% for those with some college. These workers have had steeper declines in unemployment, but less educated workers continue to face more unemployment than college graduates. In October, the unemployment rate of college graduates remained below 2%, while 3% of those with some college, and 3.9% of those with no college were unemployed.

College educated workers have driven the recovery in labor force participation.

In October, the labor force participation rate of college graduates ticked down to 72.8% from 73% in September, yet the labor force participation rate of college graduates has nearly fully recovered to pre-pandemic rates. In contrast, the labor force participation rates of those with only a high school degree or some college, remain roughly 2 percentage points below their February 2020 levels. These declines exacerbate the large differences in labor force participation by education that existed prior to the pandemic.

Differences in the recovery are even more pronounced when we look at the labor force participation rate of prime-age workers–those 25-54 years old–by education. While these data are not available with the initial release, the following figure shows the average labor force participation among prime-age adults by education in the third quarter of each year between 2017 and 2022. By the third quarter of 2022, labor force participation among prime-age college graduates had returned to their 2019 rates. The quick recovery among college graduates reflects the fact that they also had the smallest decline in labor force participation at the onset of the pandemic. In contrast, labor force participation rates fell more sharply among those with less than a bachelor’s degree. Among prime-age workers with a high school degree or less, labor force participation rates began to recover in 2021 and more sharply in 2022. Among prime-age workers with some college, labor force participation rates only began to recover in 2022. This pattern of a slower recovery for workers with less education matches that seen in previous recessions. Today’s prime-age workers without a college degree have labor force participation rates similar to their 2017 labor force participation rates. The current labor market recovery has been much faster and it is likely their labor force participation will continue to recover in the coming months if the labor market remains strong.

 

After the pandemic, Black and Hispanic adults have higher labor force participation than white adults.

The initial 2020 shock hit people of color hardest, partly because they were more likely to work in-person and service-sector jobs. However, their labor force participation rates have recovered more quickly than that of white adults. As a result, among people ages 20 and up, white people have the lowest labor force participation. Much of this is driven by longer-run trends in aging, and these differences flip when we focus on prime-age workers. However, the short run changes during the pandemic have played a role as well. White people had a much weaker labor force recovery, gaining back the smallest share (52%) of their initial pandemic drop, compared with 72% for Black people and 58% for Hispanic people.

This month the labor force participation rate of white people ages 20 and older stayed the same at 63.5%, while the rate among Black people ages 20 and older ticked down to 64.5% from 64.7%, and the rate for Hispanic people was unchanged at 69.5%.

In particular, prime-aged women of color are more likely to be in the labor force than prior to the pandemic.

Across the board, women have had the most complete labor force participation recovery. Because data on prime-age workers by race is not seasonally adjusted, a single month of data isn’t very informative. Therefore our figure compares August through October of 2022 to the same three months in 2019. Prime-age Black women have experienced the largest increase in labor force participation compared with their labor force participation in the same period prior to the pandemic. Black women have historically had a higher labor force participation rate than white women or Hispanic women, but those gaps have grown during the recovery from the pandemic. This recovery occurred despite the pandemic’s lasting impact in hotels, restaurants, and care facilities, as well as many other industries that employ a disproportionate number of women (and Black and Hispanic women in particular). In the face of what are still reduced employment numbers in these industries, relatively high prime-age labor force participation rates denote the flexibility of women in finding employment in whatever sectors are hiring.

October brought growth of nearly 5,000 workers in child care.

While women, particularly prime-age women, have fully returned to the workforce, they are doing so with less support from formal child care. In April 2020, child care employment declined by 35%, more than twice the 15% decline across all non-farm employers. The recovery in child care employment has been much weaker than the economy overall. In July, overall employment surpassed its pre-pandemic peak, while employment in child care was still nearly 10% below its pre-pandemic peak. Recovery in the child care sector had slowed since the summer of 2022, making today’s job gains a significant increase compared to the last three months. In October, the addition of 4,900 child care workers narrowed the gap to 8.4% below the pre-pandemic peak. Continued hiring in child care will likely require increasing wages for workers in this sector as child care workers are some of the lowest paid workers. As a result, families who rely on affordable child care continue to face challenges fully participating in the labor market.

About this analysis

The University of Michigan’s monthly Rapid Insights labor market analysis is conducted by Betsey Stevenson, economist at the Gerald R. Ford School of Public Policy; and Benny Docter, senior data and policy analyst at Poverty Solutions. The project is funded by the Robin Hood Foundation, with support from the Ford School and Poverty Solutions.