Two years after the country entered the Great Recession, there are signs the national economy has slowly begun to recover. Thus far recovery has meant the return of economic growth, but not the return of jobs. And just as some communities have felt the downturn more than others, recovery has not and will not be shared equally across the nation’s diverse metropolitan economies.

Within metropolitan areas, many communities continue to struggle with high unemployment and increasing economic and fiscal challenges, while at the same time poverty and the need for emergency and support services continue to rise. Even under the best case scenario of a sustained and robust recovery, cities and suburbs throughout the nation will be dealing with the social and economic aftermath of such a deep and lengthy recession for some time to come.

An analysis of unemployment, initial Unemployment Insurance claims, and receipt of Supplementary Nutritional Assistance Program (SNAP, formerly known as food stamps) benefits in urban and suburban communities over the course of the Great Recession reveals that:

• Between December 2007 and December 2009, city and suburban unemployment rates in large metro areas increased by roughly the same degree (5.1 versus 4.8 percentage points, respectively). By December 2009, the gap between city and suburban unemployment rates was one percentage point (10.3 percent versus 9.3 percent)—smaller than 24 months after the start of the first recession of the decade (1.7 percentage points) and the downturn in the early 1990s (2.2 percentage points).
  
  
• Western metro areas exhibited the greatest increases in city and suburban unemployment rates—5.8 and 5.6 percentage points—over the two-year period ending in December of 2009. Increases in unemployment rates tilted more toward primary cities in Northeastern metro areas (a 5.3 percentage-point increase versus 4.2 percentage points in the suburbs), while suburbs saw slightly larger increases in the South (5.0 versus 4.4 percentage points).
  
  
• Initial Unemployment Insurance (UI) claims increased considerably between December 2007 and December 2009 in urban and suburban areas alike. The largest increases in requests for UI occurred in the first year of the downturn—led by lower-density suburbs—with new claims beginning to taper off between December of 2008 and 2009.
  
  
• SNAP receipt increased steeply and steadily between January 2008 and July 2009 across both urban and suburban counties. Urban counties remain home to the largest number of SNAP recipients, though suburban counties saw enrollment increase at a slightly faster pace during the downturn—36.1 percent compared to 29.4 percent in urban counties.
  

Even as signs point to a tentative economic recovery for the nation, metropolitan areas throughout the country continue to struggle with high unemployment. Within these regions, the negative effects of this downturn—as measured by changes in unemployment and demand for safety net services—have been shared across cities and suburbs alike. Standardizing sub-state data collection and reporting across programs would better enable policymakers and services providers to effectively track indicators of recovery and need in the nation’s largest labor markets.

Read the Full Paper » (PDF)
Read the Related Report: Job Sprawl and the Suburbanization of Poverty »

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• Full Paper
• Appendix A
• Appendix B
• Appendix C

      

       

       

       

       

There has been no shortage of news about South Africa’s recent economic and political turmoil—from its plummeting currency and slowing economy, to President Zuma’s cabinet shake-up, to weeks-long student protests over rising tuition fees in October.

Understanding what is driving political volatility requires understanding the central economic challenge facing South Africa’s major metropolitan regions: insufficient labor market opportunities for young people.

A recent Brookings report found that the unemployment rate among youth (ages 15 to 34) in Gauteng, the home province of the Johannesburg region, was nearly 40 percent, exceeding the 37 percent national rate. Young people continue to flock to Johannesburg, and the broader Gauteng City-Region that surrounds it, in search of economic opportunity. But the city-region has only created jobs at a 1.3 percent annual clip since 2000, far lower than peer regions like Shenzhen (8.2 percent), Istanbul (2.8 percent), and Santiago (2.4 percent), limiting its ability to absorb young workers. At the same time, the skills demands of the labor market have shifted as the region’s economy has transitioned from mining to more advanced services, creating a mismatch between what education and training systems are providing and what the labor market demands. This employment crisis matters for both economic competitiveness (output per worker growth, a rough measure of productivity, has stagnated since 2010) and economic justice (the unemployment rate for black South Africans is four times the rate for whites).

At a recent Global Cities Initiative event in Johannesburg local private, public, and civic leaders discussed both the immense scale of the youth unemployment challenge and an ambitious proposed solution: the youth skills empowerment initiative “Vulindlel’ eJozi” (a Zulu phrase meaning “open the way in Johannesburg”) created by the city of Johannesburg in partnership with the Harambee Youth Employment Accelerator. Of the approximately 1.6 million Johannesburg residents aged 19-34, just under half are not engaged in employment, education, or training. Vulindlel’ eJozi’s seeks to “reach 200,000 of these young people to meaningfully include and engage them in our economy over the next year.”

Vulindlel’ eJozi stands out for at least two reasons. Most glaringly is its sheer scale. Through its work with Harambee and other initiatives, the city of Johannesburg provided over 45,000 opportunities for youth to move towards employment during the first quarter of 2015. Second, the partnership leverages the resources and competencies of the private and civic sectors. Harambee has successfully trained and placed 20,000 youth in sustained formal employment with over 200 employers and ambitiously wants to engage 500,000 South African youth in their training programs. Constant employer feedback on what skills are demanded is one of the accelerator’s hallmarks, helping Harambee achieve higher trainee retention rates than industry averages.  

Youth unemployment, of course, is not a problem unique to South Africa. Recent Brookings research found that labor force participation, employment, and median earnings among American teens and young adults all declined between 2000 and 2014. How effectively the city of Johannesburg can build the institutional architecture to engage with private and NGO actors on a youth employment initiative at this scale will ultimately determine its success. These lessons could serve other cities well as they seek to deliver economic opportunity to their young people.

      

Interpreting employment stats among young people can be tricky. No one expects employment rates among teens or people in their early 20s to reach those of prime-age workers. These are prime years for what economists call “investing in human capital,” an activity most people would describe as “going to school.”

Education requirements for good jobs are getting higher, so finishing high school and earning a post-secondary credential like two or four-year college degrees, apprenticeships, or certifications are top priorities. But early work experiences can allow young people to learn new skills, gain experience, and expand networks. Evidence suggests that it can improve employment prospects down the line. And the earlier that people are exposed to the workplace, the earlier they learn such skills as teamwork, communication, and dependability—skills that employers say are in short supply. 

The employment rate for teens fell from 43 percent in 2000 to 26 percent in 2014, and for young adults aged 20 to 24, it fell from 70 to 62 percent. These are big drops. In a new analysis, I take a deeper look at employment trends among young people. When employment rates are broken out by age and race/ethnicity, you see the same downward pattern, but also substantial variation among whites, blacks, Latinos, and Asians.

Do these declines spell trouble? The answer is, it depends:  on how young people spend their time, what resources and support are available to them, and how the person making the judgement values academics and enrichment relative to employment.

Some argue that workplace experience provides key developmental opportunities that benefit all young people. Robert Halpern, for example, wryly notes that high school students are isolated from the adult world “at just the moment when [they] need to begin learning about participating in it.” 

Others say that employment matters more for some young people than others. For example, disadvantaged youth—those not on track to earn a post-secondary credential and without strong family or community  networks to help them find jobs—can particularly benefit from formal programs that connect them to the labor market. As Jeylan Mortimer concluded about “low academic promise” high school students (those with poor grades and low educational goals): “[H]aving a positive work experience can help to turn you around.  For those who have a lot of disadvantages, any positive experience is likely to have a greater impact than on people with a lot of advantages already.” Research on Career Academies, high schools that combine academics with career development, support this view. Career Academy students, disproportionately low-income, black, and Latino, posted significant earnings gains eight years after graduation, and young male graduates also had higher rates of marriage and custodial parenthood.

And some would say that it’s appropriate to prioritize education over employment, especially for teens, who are typically not responsible for supporting themselves and their families.

So what do the data tell us? Voluntarily dropping out of the labor force to concentrate on academics as a young person can pay off when people enter their prime working years, generally considered to be 25 to 54. Though education and work are not necessarily incompatible, employment rates are generally lower among students than among those not enrolled in school. Among teens and young adults, Asians have the lowest employment rates, but they also have the highest school enrollment rates. 92 percent of Asian 16- to 19-year-olds and 63 percent of Asian 20- to 24-year-olds are in school, compared to 80 percent and 38 percent among all races. It follows, then, that Asians have high levels of educational attainment. In fact, 50 percent of 23- to 24-year-old Asians have a Bachelor’s degree, double the average rate. Given the strong correlation between education and employment, it is not a coincidence that prime-age Asians have high employment rates and low unemployment rates. Their low employment rates as young people do not, on the whole, seem to lead to problems as adults. (Of course, this is not to downplay the diversity of the Asian population and to suggest that all Asians are doing well economically.)

On the other hand, blacks have the second lowest employment rates as teens and young adults, and the lowest rate as prime age workers. They also have the highest unemployment rates, showing an active desire to work. Among black teens in 2014, the unemployment rate was 38 percent, compared to 23 percent overall, and it was 22 percent among black young adults, compared to 13 percent overall. The trend continues into prime working years: blacks have an unemployment rate of 11.4 percent, nearly double the overall rate of 6.2 percent.  The low employment rate among young black people is not driven by school enrollment. Latinos have similar (below-average) enrollment levels but higher employment rates, and whites have much higher employment rates but only slightly higher enrollment levels. The weaker employment outcomes of blacks at all ages is probably related to multiple factors: relatively low levels of educational attainment, discrimination, and the neighborhood effects of living in concentrated poverty.

Blacks and Latinos are disproportionately represented among so-called “disconnected youth,” young people aged 16 to 24 who are neither working nor in school. 17 percent of black young adults aged 20 to 24 are disconnected, as are 13 percent of Latinos, 7 percent of whites, and 4 percent of Asians. Half of disconnected young adults have a high school credential and another 20 percent have taken some college courses, suggesting that getting these young people on a better path involves not only reducing the high school dropout rate, but also strengthening the transition from high school to post-secondary education and the labor market. 

In short, employment rates among young people tell different stories that often track by race and ethnicity. Some voluntarily withdraw from the labor market to focus on academics and extra-curricular activities, others would really like a job but can’t find one, and some—the most disadvantaged—are alienated from both school and the labor market.

      

In a recent analysis, I highlighted how employment and disconnection among young people vary by age, race, and place. In this podcast, I dig deeper into the data on the Washington, D.C. region. Although the area generally performs well on employment measures, not all young people are faring equally well.

Listen to the full podcast segment here: 

       

June’s jobs gains, released this morning, show that 287,000 new jobs were added in June, an impressive rebound after only 11,000 new jobs were added in May (revised down from from 38,000 at the time of the release).

This year’s monthly job gains and losses can indicate how the economy is doing once they are corrected to account for the pattern we already expect in a process called seasonal adjustment. The approach for this seasonal adjustment that is presently used by the Bureau of Labor Statistics (BLS) puts very heavy weight on the current and last two years of data in assessing what are the typical patterns for each month.

In my paper “Unseasonal Seasonals?” I argue that a longer window should be used to estimate seasonal effects. I found that using a different seasonal filter, known as the 3x9 filter, produces better results and more accurate forecasts by emphasizing more years of data. The 3x9 filter spreads weight over the most recent six years in estimating seasonal patterns, which makes them more stable over time than in the current BLS seasonal adjustment method.

I calculate the month-over-month change in total nonfarm payrolls, seasonally adjusted by the 3x9 filter, for the most recent month. The corresponding data as published by the BLS are shown for comparison purposes. According to the alternative seasonal adjustment, the economy added 286,000 jobs in June (column Wright SA), almost identical to the official BLS total of 287,000 (column BLS Official).

Data updates released today for prior months also reveal some differences between my figure and the official jobs gains from prior months. The official BLS numbers for May were revised down from 38,000 new jobs to a dismal 11,000. My alternative adjustment shows that the economy actually lost 6,000 jobs in May, down from 17,000 jobs gained at the time of the release. [i] The discrepancies between the two series are explained in my paper.

In addition to seasonal effects, abnormal weather can also affect month-to-month fluctuations in job growth. In my paper “Weather-Adjusting Economic Data” I and my coauthor Michael Boldin implement a statistical methodology for adjusting employment data for the effects of deviations in weather from seasonal norms. This is distinct from seasonal adjustment, which only controls for the normal variation in weather across the year. We use several indicators of weather, including temperature and snowfall.

We calculate that weather in June brought up the total by 25,000 jobs (column Weather Effect), but this should be considered a transient effect. Our weather-adjusted total, therefore, is 262,000 jobs added for June (column Boldin-Wright SWA). This is not surprising, given that weather in June was in line with seasonal norms.

It’s good to see the jobs numbers rebounding this month. The May number was somewhat affected by the Verizon strike. Also, it is important to remember that pure sampling error in any one month’s data is large, and that could explain part of the weak employment report for May. Averaging over the last three months, employment is expanding by about 150,000 jobs per month—a healthy pace, although a bit of a step down from last year.

a. Applies a longer window estimate of seasonal effects (see Wright 2013). The June 2015 to May 2016 values in this column have been corrected to remove a coding error that affected the previously reported values.

b. Includes seasonal and weather adjustments, where seasonal adjustments are estimated using the BLS window specifications (see Boldin & Wright 2015). The incremental weather effect in the last column is the BLS official number less the SWA number.

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[i] Note that, due to a small coding error, my alternative seasonal adjustment for May, at the time of the release, should have been 17,000 new jobs, not -4,000, as was reported in my previous post. In addition to the underlying data revisions, and correcting for this error, the revised alternative seasonal adjustment for May is -6,000 jobs added (second row of column Wright SA).

       

       

       

       

       

       

BPEA co-editor Justin Wolfers describes new research that found: people dropped out of the labor force before the recession started; there are better ways to forecast unemployment; homebuyer expectations helped inflate the bubble; the U.S. is not actually as politically polarized as most people think; central banks’ recent experiments with capital controls haven’t delivered results; and the U.S. is making inroads fighting poverty.

Video

• U.S. Not Actually as Politically Polarized as Most Think
• Poverty Has Fallen Much More than Previously Thought
• New Unemployment Model Can Outperform Forecasters
• Perceptions Matter: Homebuyer Expectations Helped Inflate Bubble
• Central Banks’ Recent Experiments with Capital Controls Haven’t Delivered Results

      

The headlines seem pretty good. Unemployment fell a tick to 7.3 percent. And jobs growth continued, with payrolls expanding by 169,000 in August, which is just shy of the 175,000 new jobs that analysts were expecting.

But beneath the headline: blech!

The most important news was the revisions to what we had previously thought was a healthy and perhaps self-sustaining recovery. Instead, jobs growth in July was revised from 162,000, to a weak 104,000, and June was also revised downward. Taken together, this month's revisions means we've created 74,000 fewer jobs than previously believed. And the previous jobs report subtracted another 26,000 jobs through revisions. Moreover, for reasons that remain a mystery, revisions have tended to be pro-cyclical, meaning that the healthy recovery we thought we were having might have been expected to yield further upward revisions. All this means that analysts are hastily revising their views.

The other bad news comes from the household survey, where employment fell 115,000, leading the employment-to-population ratio to decline by 0.1 percentage points. So the decline in the unemployment rate isn't due to folks getting jobs; instead, it's due to people dropping out of the labor force.

I have two simple metrics I use to measure the "underlying" pace of jobs growth. The first puts 80% weight on the (more accurate) payrolls survey, and 20% weight on the noisier household survey. That measure suggests employment grew by only 112,000 in August. The alternative is to focus on the 3-month average of payrolls growth, which suggests we're creating slightly around 148,000 jobs per month.

Bottom line: This report says that we're barely creating enough jobs to keep the unemployment rate falling from its current high levels. Policymakers have been looking for a signal that the recovery has become self-sustaining. This report doesn't provide it. And until we're confident that the recovery will keep rolling on, we should delay either any monetary tightening, further fiscal cuts, and definitely postpone the legislative shenanigans that Congress is threatening.

       

       

       

       

       

       

Today on Toothpaste For Dinner: self employment