An important warning sign for the economy is flashing
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The unemployment rate for Black Americans is up sharply this year.
Why it matters: It's a crisis for those losing their jobs and a flashing red indicator light for the economy overall.
How it works: The Black unemployment rate has long been higher than the jobless rate overall — but the gap narrows when the labor market is strong, as it was in 2019 right before the pandemic and during the strong job market of 2022 and 2023.
- When the labor market weakens, some research shows that Black workers face higher unemployment rates.
- "When the economy takes a downturn, it hits Black Americans first," says Chris Martin, lead researcher on jobs site Glassdoor's economic research team.
By the numbers: The Black unemployment rate was 7.5% in August — a rate that would be viewed as catastrophic if it were the overall jobless number. It is up more than a point from the beginning of the year.
- That's compared with an overall unemployment rate of 4.3%, up slightly from 4% in January. The white unemployment rate (3.7%) is also up just 0.2 points over that period.
- Still, the most recent jobs report showed that job growth overall has slowed considerable over the past few months.
"It seems fairly clear that declines in Black employment are likely connected to a broader slowdown," says Jessica Fulton, vice president of policy at the Joint Center for Political and Economic Studies, which advocates for policies that improve outcomes for people of color.
The big picture: This isn't just about the business cycle. There's more going wrong for Black Americans.
- Primarily, federal government layoffs, which appear to have disproportionately impacted Black people.
- There has also been a pullback in efforts by companies to prioritize hiring people of color. And companies have disbanded DEI (diversity, equity and inclusion) teams where some of their Black employees worked.
Between the lines: Beginning in 2020, the Federal Reserve took a more inclusive approach to its mandate to keep unemployment in check — explicitly saying that achieving maximum employment was an "inclusive goal."
- That appears to have meant looking at the Black unemployment rate among several indicators to judge if the economy was at maximum employment, as Goldman Sachs laid out in a 2021 note.
- But this year, like many groups that have pulled away from diversity in the second Trump era, the Fed dropped the use of the word "inclusive" in its statement.
What to watch: The question now — will the Fed pay attention to the spike in Black unemployment as it considers a rate cut?
