Unemployment is at an all-time low – 3.7% as released by BLS on Oct. 19 for September. But this only tells part of the story and misses important divergences since the Great Recession. Certainly (hopefully) election pundits and pollsters are aware of these nuances. For example, Hawaii had the lowest unemployment at 2.2% while Alaska weighed in at 6.5%. In terms of local areas (August, 2018 and lagged one month behind state data) Ames, Iowa had the lowest unemployment at 1.7% while Yuma, Arizona had 22% in the same month and El Centro, California registered 20%. In terms of metro areas with more than one million population, Minneapolis-St. Paul-Bloomington had the lowest August unemployment at 2.5% while New Orleans-Metairie had the highest at 5.3% followed by Cleveland-Elyria, Ohio at 5.2%.
As most readers know, unemployment is only part of the story: labor force participation forms the base of the unemployment analysis. That figure, particularly since the Great Recession, only reflects a portion of the working age population. U.S. labor force participation in 2017 was 73.3% according to OECD data, which is better than many countries, but worse than 25 countries including Japan, Germany, Canada and the UK, but also countries such as Estonia, Latvia, Czech Republic, Spain, Portugal, Greece, Slovenia, Russia, Colombia and others. What the rest of the working age population in the U.S. is doing is an important subject in itself but we save that for future blog posts. To say we are at “full employment” is missing important features of our current economy.
A more sobering perspective is found in the Federal Reserve’s summary of the Survey of Consumer Finances, “Changes in U.S. Family Finances from 2013-2016”. Looking at the median vs. average (mean) net worth of specific populations highlights some stark differences. For example, the median family net worth in 2016 for white families was $171,000 while the mean was $933,700. Among black families the figures are $17,600 median net worth compared with a mean net worth of $138,200. Hispanic families are slightly better off with median and mean net worth of $27,000 and $191,200 respectively. It should be said that median net worth for all groups grew on a real basis in the 2013-2016 period compared with the post-recession period 2007-2013 with black and Hispanic families gaining at a faster rate than whites. However, the absolute differences still loom large.
The takeaway here is that a portion of the population has done remarkably well since the recession. On a mathematical macro basis this averages up net worth and averages down unemployment figures – but misses a full understanding of the well-being of important other segments of the population.
The Economic Innovation Group’s Distressed Communities Index (DCI) paints the picture on a geographic basis. In their 2018 report “From Great Recession to Great Reshuffling” they studied two time periods: 2007-2011 and 2012-2016, which “roughly correspond to the shared experience of the recession and the deeply divergent experiences of the recovery (italics are ours).” The DCI comprises seven factors and was applied to each U.S. zip code. The factors include: no high school diploma, the housing vacancy rate, the percent of prime-age population not working, the poverty rate, the median household income as a percent of the state’s median household income, the change in employment and the change in the number of business establishments. The group broke down the many zip codes into five distinct quintiles: “prosperous”, “comfortable”, “mid-tier”, “at risk” and “distressed”.
A few takeaways:
- 86.5 million Americans, or 27.4% of the US population, lived in a prosperous zip code while 50 million lived in a distressed one during the 2012-2016 recovery period. The population of prosperous zip codes increased by 10.2 million people from theprior period and the other top two quintiles grew in population as well – so itis fair to say that the recovery did lift many boats. Meanwhile the “at risk” and “distressed” quintiles lost nearly six million people.
- Utah had the highest relative growth in population living in a prosperous zip code while Louisiana, New Mexico and West Virginia has the most zip codes falling into the distressed category. Those three states joined Alabama, Arkansas and Mississippi with more than one third of their population living in distressed zip codes. Sadly, minority groups (all races and ethnicities except non-Hispanic whites) comprised nearly 56% of the populations in distressed zip codes compared with their representation of 38.2% of the overall population. On a brighter note, more majority-minority zip codes improved their DCI score since the recession than majority-white, modestly narrowing the gap.
- Prosperous zip codes recovered their recession job losses fully – and in fact did so one year ahead of the rest of the economy accordingto EIG. Prosperous zip codes were almost solely responsible for any of the country’s net job growth. “At risk zip codes lost an entire decade tothe Great Recession. Distressed zipcodes, for their part, are projected to never fully recover from the Great Recession on current trendlines”. The following chart, reprinted with permission from EIG, tells much of the story pictorially.
Employment since 2007 by Quintile
