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US Workers Are So Much Better Off Today Than 4 Years Ago—It's Not Even Close
Here are some of the economic facts.
Sep 06, 2024
This is not a tough one. First and foremost, workers are better off today because they overwhelmingly have jobs if they want them. They also are getting higher pay, even after adjusting for inflation. And they tell us they are much more satisfied at their jobs.
When President Biden took office, the unemployment rate was 6.4 percent. It is currently 4.3 percent. For most of his presidency the unemployment rate has been below 4.0 percent, a stretch of low unemployment not seen in more than half a century.
The story looks even better if we look at the percentage of people who have jobs, since many people are not counted as being unemployed if they don’t even look for work because of a weak labor market.
In January of 2021, the share of people in their prime working years (ages 25 to 54) who had jobs was 76.4 percent. In the most recent data, it stood at 80.9 percent, 4.6 percentage points higher.
This is not just an issue of millions more people being able to get jobs. When the labor market is as strong as it has been, workers can have their choice of jobs. They can leave jobs where the pay is low, the workplace is unsafe, or the boss is a jerk.
The United States is the only wealthy country where workers have seen substantial wage growth since the pandemic. In most countries wages have fallen behind inflation.
Workers switched jobs in record numbers in the years 2021-2023. Tens of millions of people quit their jobs and moved on to better ones. One result was that workers reported the highest rate of job satisfaction on record. This is a big deal, since most workers spend a large share of their waking hours on the job.
The tight labor market also gave workers the power to resist employers’ demands that they return to the office when the worst of the pandemic was over. As a result, the number of people who report being able to work from home has increased by 19 million from the pre-pandemic level.
This shift has been largely ignored by the media, but these workers are saving hundreds of hours a year in commuting time and saving thousands on transportation and other commuting-related expenses. It’s true that the option to work from home is mostly available to higher paid workers, but 19 million people is nearly one-eighth of the workforce, not some tiny elite.
If working from home was a benefit that mostly went to higher paid workers, the pay increases disproportionately went to those at the bottom, reversing the pattern that had been in place for more than four decades. An analysis from the Economic Policy Institute found that wages for workers in the bottom ten percent of the wage distribution increased by 13.4 percent from before the pandemic, after adjusting for inflation.
Wages for workers in the middle increased by 3.0 percent over this period, also after adjusting for inflation. This is not great, but it is better than what we saw over most of the prior four decades, when wages were often stagnant or falling.
And this wage growth occurred in spite of a worldwide pandemic that whacked growth and caused inflation everywhere. The United States is the only wealthy country where workers have seen substantial wage growth since the pandemic. In most countries wages have fallen behind inflation.
It is also important to realize the world-leading recovery was not something that just happened. It was not inevitable that the economy would bounce back quickly from the pandemic shutdowns. There was very rapid job growth in the summer of 2020, as most of the shutdowns ended. But job growth slowed considerably in the fall. In the last three months of the Trump administration, we were creating jobs at the rate of just 140,000 a month. At that pace it would have taken us more than five and a half years to get back the jobs lost in the recession.
The Biden administration’s recovery package got back these jobs in less than a year and a half. The rapid job growth has continued so that we now have 6.4 million more jobs than we did before the pandemic. With the economy still growing at a good clip and inflation back to its pre-pandemic pace, for workers the future is bright.
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The Best Black Economy in Generations Isn’t Enough
To overcome centuries of inequality, we’ll need dedicated public policy such as Investment in quality education, access to affordable healthcare, affordable housing, job creation, and Baby Bonds.
Sep 04, 2024
As the country moves rapidly toward the 2024 elections, Black Americans are experiencing the best economic conditions they’ve had in generations. Record low unemployment rates, record low poverty rates, and record high levels of income and wealth paint a picture of Black prosperity.
Yet African Americans remain mired in great economic insecurity, reflected in their low opinion of the economy, widespread asset poverty, and ongoing economic inequality between Black and white households.
The best Black economy in generations, in short, isn’t enough. To overcome centuries of inequality, we’ll need dedicated public policy.
Black median income today is still nearly $30,000 lower than the white median—it’s not even caught up with the white median income of 1972.
Let’s look at some numbers from a new report we put out for the Joint Center and the Center for Economic and Policy Research.
From 1972 to 2022, the annual Black unemployment rate averaged 11.6%. Last year, it averaged 5.5%, a historic low. That’s good news, but it’s barely put a dent in the gap between Black and white employment.
We calculate that Black America would need an additional 1.4 million jobs for Black people to be employed at the same rate as white people. This employment gap cost Black Americans roughly $60 billion last year compared to what they’d have made if those jobless individuals were working.
So for African Americans, the racial employment divide remains quite costly. Other indicators tell a similar story.
For example, Black median household income is also at its highest point in a generation, growing from about $41,000 in 2011 to nearly $53,000 in 2022—a nearly 30% increase. That same year, median Black wealth also reached a new high of nearly $45,000, more than double the post-Great Recession low of about $17,000.
Still, Black median income today is still nearly $30,000 lower than the white median—it’s not even caught up with the white median income of 1972. And the average Black median wealth of about $45,000 means the vast majority of African Americans fall well short of the $190,000 to $570,000 estimated as necessary to reach middle-class status.
Will these disparities correct themselves on their own? Not likely.
As the Institute for Policy Studies and the National Community Reinvestment Coalition found in their 2023 “Still A Dream” report, the nation is still moving at a glacial pace when it comes to bridging Black/white economic inequality. If the country continues at the rate it’s been moving since the 1960s, it will take over 500 years to bridge the racial income gap—and nearly 800 years to bridge the racial wealth gap.
So while Black Americans are experiencing significant economic gains, these advances are insufficient to overcome entrenched inequalities. The economic progress we see today is a foundation, not a finish line. It speaks to the need for comprehensive policies that address ongoing barriers to economic security and wealth-building.
Investment in quality education, access to affordable healthcare, affordable housing, job creation targeted to high-unemployment communities, and new publicly financed asset building opportunities like Baby Bonds are essential. These measures can help ensure that the economic gains of today translate into sustained prosperity and security for future generations.
As we approach the presidential election, let’s not make this election a contest between individuals but of policies that can heal our deep wounds of racial and economic inequality.
Addressing these issues with urgency and commitment will not only improve the economic outlook for Black Americans—it will create the basis for a more united country.
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The Lights are Flashing Red: The Fed Must Call an Emergency Meeting to Cut Rates
Making people walk an economic tightrope is not the path forward to a healthy economy.
Aug 09, 2024
Most people probably aren't thinking about the Federal Reserve's policy decisions on a daily basis. However, they feel the impact of them every day. High interest rates mean that paying down a credit card becomes more expensive, purchasing a home or a car feels out of reach, and the likelihood of losing your job goes up.
For months, the data have been hinting that the Fed's 23-year-high interest rates were starting to take a toll. U.S. household debt has surged to an all-time high, and delinquency is increasingly in the cards. And last Friday, the unemployment rate ticked up to 4.3%, and both employment and wage growth slowed down.
It is clear that the Federal Reserve made a massive mistake in not cutting rates in July. The Fed must call an emergency meeting and cut rates by at least 75 basis points immediately. Failing to do so risks inflicting even more pain on the same people who have borne the brunt of inflation since the pandemic.
Interest rates remain unaccountably high, continuing to put pressure on the well-being of the everyday people who keep our economy going.
Chair Powell has repeatedly expressed commitment to a (completely arbitrary) 2% inflation target. And by all accounts, we are at that target: the three-month annualized Personal Consumption Expenditures price index, the Fed’s preferred measure of inflation, is just 1.5 percent. But interest rates remain unaccountably high, continuing to put pressure on the well-being of the everyday people who keep our economy going.
The Fed's high interest rates are counterproductive, making a large rate cut now ever more urgent. Take housing, for example. The Fed's high interest rates put upward pressure on housing prices. High mortgage rates put homeownership out of reach for prospective buyers, pushing them back into the rental market, and driving up rents. High interest rates also make financing new housing construction more expensive, which means that builders don't build as many new homes. This is especially galling in the midst of a long-standing housing shortage of as many as 7 million homes.
High interest rates also make it more expensive for people to pay down their debts, increasing the likelihood of delinquency. A recent New York Fed report found that early delinquencies on auto loans and credit card debt began rising for low-income borrowers in 2022 and now exceed pre-pandemic levels, and credit card and auto loan balances are the highest they have been since the 2008 financial crisis. This is not just concerning for individuals and households, who face long-term scarring from these periods of financial stress, but also for the economy as a whole.
High interest rates aren't just getting in the way of building more houses and driving people into financial crisis, they're also blunting the impact of historic efforts to tackle climate change. Interest rates are more than double what they were when the Inflation Reduction Act passed. The IRA’s tax credits and subsidies require debt-financed private investment, which companies are eager to pursue. But many of these capital-intensive industries cannot withstand the burden of high rates. In offshore wind, for example, an estimated 60% of cost increases are squarely to blame on high interest rates.
The truth of the matter is that the Fed's sky-high interest rates aren't just making people's lives more difficult and stymieing much-needed investments. Using interest rates to tackle today's inflation also fails to tackle the root causes of the problem.
Today's inflation started because a pandemic collided with a broken supply chain built to maximize profits for the big corporations that designed it over any semblance of resilience and functionality. Those same corporations then hid behind the cover of inflation to jack up prices on consumers, raking in record profits along the way. Research from my organization, Groundwork Collaborative, found that from April to September 2023, corporate profits drove over 50% of inflation.
The Fed's sky-high interest rates aren't just making people's lives more difficult and stymieing much-needed investments. Using interest rates to tackle today's inflation also fails to tackle the root causes of the problem.
Powell himself has admitted that interest rate hikes can't tackle the supply-side issues at the root of today's inflation. And now the data are clear that he is taking the economy to the brink, despite low inflation and rising unemployment.
Making people walk an economic tightrope is not the path forward to a healthy economy. The Fed has a dual mandate to maintain stable prices and full employment. It's time for the Fed to take that mandate seriously and make a large and immediate emergency rate cut.
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