T
he labor market added another 353,000 jobs in January. The Bureau of Labor Statistics revised the estimates for the prior two months up by 126,000 jobs. Amid these strong jobs gains, the unemployment rate stayed at 3.7%. It now has remained below four percent for 24 months, the longest such period since the early 1960s. As employers kept competing for workers, wages for all workers grew by 4.5% over the last 12 months. The unexpectedly strong performance, countering a weaker report one month earlier, led conservative commentator Larry Kudlow to pronounce it a “blowout jobs report”.
The labor market still has room to grow, notwithstanding these remarkable measures. Overall employment rates for prime-age workers, those aged 25 to 54 years old, are still below their historic peaks. This is especially true for men. Many women, disabled workers, older workers, and Black and Latino workers continue to face obstacles to finding employment that pays well and accommodates their needs. The labor market is still not at full employment.
The Employed Share Of Prime Age – 25 to 54 Years Old – Workers Still Below Historic Peaks
The employed share of workers in their prime earnings years – from 25 to 54 years old – is still below its historic peaks. In January 2024, the Bureau of Labor Statistics estimated this ratio to be 80.6%, roughly where it has been for the past twelve months. This is still below the recorded peak level of 81.9% in April 2000. If that rate had prevailed in January 2024, there would have been 2.1 million more workers in their prime earnings years in the labor market.
Women’s Rising Employment Does Not Fully Offset Men’s Declining Employment
The fact that the employed share of prime-age workers is below its peak largely reflects a secular decline of men’s employment. Since hitting its last peak of close to 95% in the mid-1960s, the employed share of men between the ages of 25 and 54 years has trended downward. It stood at 86.2% in January 2024. In contrast, women’s employment-to-population ratio for those aged from 25 to 54 years old grew from a low of about one-third immediately following World War II to its highest levels of more than 75% for most of the past twelve months. The labor market has undergone a massive shift in employment from men to women, with millions of people not working.
The reasons for the decline in men’s prime-age employment have been subject to several academic studies in the past. Potential reasons for the decline are growing health challenges, including the opioid crisis, trade shocks that especially hurt the employment changes of those with less educational attainment and increasing automation in industries that have been traditional employers for men, such as manufacturing, and the growing incarceration of especially Black men. Reviving men’s employment attachment in their prime earnings years would then require a holistic policy approach.
On the other side, women’s employment still lags that of men, even after decades of improvements. The lack of an affordable care infrastructure means that many women, who are often the primary caregivers for children, partners and parents must choose between working full time and providing care. Addressing the care crisis that befalls many families and hinders mainly women from working due to the gendered nature of care could significantly increase the labor supply of women. After all, there would be more than five million additional women in their prime-earnings years working at this point, if they had the same employment to population ratio as men in January 2024.
Employment Options For Disabled Workers Still Lag Far Behind
The employment of disabled workers also deserves a lot more attention. The pandemic brought about a reversal in disability trends in the population. Since 2020, the number of disabled people at all ages has grown especially fast, possibly due to the longer-term effects of the Covid-19 pandemic.
Even as disability becomes more widespread, adequate employment options for disabled workers are difficult to come. The employed share of disabled workers stood at 22.9% in January 2024. To be clear, this is a substantial increase from an employment-to-population of 18.8% before the pandemic in January 2020. The data suggest that employers often make some accommodations to keep disabled workers employed in a tight labor market with overall low unemployment rates. But, those accommodations are clearly not enough, reflected in part by the higher unemployment rate of disabled workers. It was 69.3% higher than that for non-disabled workers – 6.6% compared to 3.9% — in January 2024. Many disabled workers cannot find adequate employment, even as job openings are well above the levels before the pandemic.
Older Workers Often Find A Difficult Labor Market
More and more older workers are in the labor force. The employed share of workers 55 to 64 years old has trended up since the early 1980s as has the employed share of people 65 years old and older. By January 2024, 37.4% of people 55 years old and older were employed, up from less than 30% in the early 1980s.
Many older workers want or need to work longer. But, they often run into obstacles to doing so. Older workers face age discrimination, stereotypes, a lack of training opportunities, incompatibility between expected work schedules and caregiving responsibilities and end up with few chances to meaningful employment or reemployment. In the end, too few older workers find rewarding employment, even as the population rapidly ages.
Black And Latino Workers Consistently Have Higher Unemployment Rates
Black and Latino workers also find greater obstacles to stable and rewarding work than is the case for white workers. The unemployment rates for Black and Latino workers are consistently higher than those for white workers. In January 2024, the unemployment rate for Black workers was 5.2% and that for Latino workers was 5.0%, compared to 3.5% for white workers.
Importantly, unemployment rate differences often persist among racialized groups, broken down further by age and education. For instance, the unemployment rate for people with some college education such as an associate’s degree was 4.8% for Black workers, 3.5% for Latino workers and 3.0% for white workers in January 2024. These persistent differences among subpopulations further underscore that people racialized as African-American or Latino face structural obstacles such as outright discrimination, occupational steering, among others. Put differently, a lot of Black and Latino workers would be employed if many of those obstacles were removed.
Keeping The Strong Labor Market Going Will Increase The Labor Supply
The strong labor market has drawn in many people, who otherwise would have found it more difficult to find stable employment. These include many women, older workers, disabled workers, and Black and Latino workers, among other marginalized groups. But, millions more are available to work and cannot find stable, rewarding work. The job market is not at full employment with so many excluded.
The economy will benefit from a greater labor supply. More workers and a greater diversity of workers can help boost productivity and innovation. Employers, for example, get the benefit from more diverse views that better reflect the population as a whole and thus their customer base. Making it easier for employers to find workers will also translate into fewer disruptions or delays of new, innovative projects, again boosting productivity growth across the economy. When all workers who want or need to work can easily find jobs, everybody wins.
It will take a wide range of targeted policy steps to remove the remaining obstacles for many usually marginalized workers to find stable employment. This will take time. In the meantime, it is critical to maintain the strong labor market with significant job gains, low unemployment rates and wage gains that outpace inflation. This will mean that the Federal Reserve will need to tread lightly with its monetary policy. It now has more room to ease up on high interest rates as inflation has eased. The old paradigm of “first do no harm” applies here, especially when considering those, who are often hurt the most in a softening labor market.