The New Challenges to Economic Equity in 2023
As the Institute highlighted in last year’s State of Economic Equity, the impact of the COVID-19 pandemic poses significant challenges to broader economic participation. Since then, the impact of the pandemic has moderated, but inflation has emerged as a major economic headwind.
After peaking in June 2022, annual inflation1 began to moderate in the second half of the year, reflecting the Federal Reserve’s move to raise interest rates initiated in March. Still, rising consumer prices remain a concern, especially for disadvantaged2 and low- and middle-income (LMI) communities.
The traditional consequence of higher interest rates is slower economic growth, which weakens the health of the labor market. While recent rate hikes have hurt rate-sensitive sectors such as real estate, the labor market remains strong.
According to the US Bureau of Labor Statistics, since February 2022, the number of non-farm payrolls in the United States has continued to increase every month. 3 Meanwhile, the country’s “official” unemployment rate continues to decline, falling to 3.4% in January 2023. This decline is not because of workers leaving the labor force, but because workers are leaving the labor force. In January 2023, nearly 2 million more people were employed than in February 2022. Furthermore, the number of jobs in the country fell by only 332,000 to 11 million at the end of the year.
How has the understanding of economic equity changed since last year’s State of Economic Equity report?
Inequities that existed before the pandemic and the rise in inflation are still present despite the strong labor market conditions. These inequities can be observed in low- and moderate-income (LMI) communities, the employment outcomes of mothers, and the employment of young adults who are not enrolled in school. Structural barriers and obstacles to opportunity are the primary reasons for the lack of economic equity, as discussed later in this article.
According to an analysis by the Institute for Economic Equity of the monthly Current Population Survey, vulnerable groups were hit first by the slowing economy in the first half of 2022. From February 2022 to August 2022, the employment-population ratios of out-of-school young adults, Latino men, and Asian women, among others, showed a downward trend.
The November analysis also showed that the employment-population ratios of women, American Indians and Alaska Natives, adults with a high school diploma and no college education, adults with some college education, and workers living in core urban areas began to decline by late summer. Although the employment-population ratios of Black men, Latina women, Asian men, suburban workers, and rural workers had increased since early spring 2022, they did so at a slower pace than the overall average. The Institute’s vulnerable workers project will be updated with data through the end of 2022 to monitor this trend. Preliminary evidence suggests that the decline in employment through August 2022 has not continued.