Shelter Inflation, Black Unemployment and The Dual Competing Mandates of the Federal Reserve

Race, Jobs, and the Economy September 2023 Update

  • Unemployment remains near record lows
  • Jobs growth appears to be returning to its pre-pandemic trend after an explosive two-year rally following the pandemic recession
  • Housing has contributed to over 90% of recent inflation
  • The Federal Reserve meets on September 19 and housing inflation and the labor market will determine the direction of monetary policy

Since March of 2022, the unemployment rate has stayed somewhere between 3.4% and 3.7%. The latest monthly report from the US Bureau of Labor Statistics (BLS) breaks this trend with the rate rising to 3.8%. The economy added roughly 187,000 jobs and an average of 249,000 for the past 12 months. While overall the numbers look good for the economy, there are areas of both concern and progress.

Among different racial, ethnic and gender groups the results were mixed. While Black women saw their unemployment rate fall again, from 5.2% to 4.7% and Black men went from 5.3% to 5%, all other groups saw minor increases in their unemployment rates. According to the BLS though, only the increases in white and Asian unemployment met the threshold for statistical significance, making it difficult to tell if this is part of a trend. It is important to acknowledge following the 60-year anniversary of the March on Washington for Jobs and Freedom that African American unemployment at 5% is still at a historical low point with a need to get down to the national average of just under 4%.


According to ADP’s National Employment Report, 177,000 private sector jobs were created in August and the total number and average monthly jobs gained in 2023 is around 2,024,000 and 253,000, respectively. This is compared to 1,994,000 and 187,000 for the BLS’s CES. For reference, ADP shows 2,766,000 jobs were added through the first 8 months of 2022. ADP noted that the less-than-stellar numbers suggest that the economy is returning to its pre-pandemic growth, where average monthly job growth was 145,000 in 2019.


The unemployment rate for groups at all education levels has followed the downward trend of the overall rate. However, in the last three months, the .43% increase for high school graduates was statistically significant. Similarly, the unemployment rates for all racial groups have stayed near their pre-pandemic or historic lows. Additionally, the unemployment rate for Black workers declined by 1.04% over the last 12 months.

Labor Force Participation

In June the prime-age labor force participation rate reached a nearly 20-year high and continued to remain high in August at 83.5%. Prime working-age men have returned to their pre-pandemic level of over 89%. For women, participation in the labor force has continued its relentless climb since the end of 2022 and reached an all-time high in July at 77.8%. 


The industries with the largest employment gains and losses in August were: health care (+71,000), leisure and hospitality (+40,000), construction (+22,000) and transportation and warehousing (-34,000). The less-than-stellar jobs growth can be attributed mainly to leisure and hospitality which has slowed down in recent months. Additionally, the slowdown in transportation and warehousing is concerning because one-third of workers in this industry are Black men.

One area to watch in the coming months is temporary help services or workers on temporary contracts. When employers begin shedding these workers it may be an early recession warning indicator. Since October of 2022, the number of temporary workers has declined and this trend continued in August. Note the similar decline that occurred before the official start of the 2007 and 2001 recessions.

Housing Inflation

Inflation, having jumped to 9% in July 2022, was 3.1% in July 2023. This dramatic decline has been welcomed by consumers and business alike but there is something unusual about the nature of inflation in the last few months. As the BLS noted in their report, 90% of the inflation increase in July was due to shelter, i.e. housing, which accounts for a third of the index. So while overall inflation has cooled dramatically year-over-year, including key basket items like food and energy, rents and housing costs have remained elevated. 

It is widely accepted that there is a 12-month lag between when landlords increase rents and when those increases are reflected in the government’s inflation data, the Consumer Price Index (CPI). This lag may explain why CPI shows shelter as remaining elevated. Regardless, there seems to be a consensus that there will be a decline over the next year. This is promising. However, as of today, rent cost burdens remain high and home prices continue to climb. The future movement of the shelter index will be something that we will monitor in the future. 

Federal Reserve 

At their last Federal Open Market Committee meeting, the Fed decided to raise interest rates to 5.25%-5.5% in an effort to bring inflation down to its 2% target. The rate hikes have caused concerns about housing affordability as 30-year fixed mortgage rates have climbed to 7.23%, the highest since before the 2007 recession. 

The FOMC meets again on September 19-20, where inflation and the employment situation, specifically wage growth, will be major factors in the decisions of the Federal Reserve. Wages have risen 4.3% over the past 12 months compared to 3.2% for inflation. It is feared that a scenario where wages are rising faster than inflation can lead to a wage-price spiral. This is when wage increases push up costs which push up prices in an endless cycle. Though not taken as seriously as it once was, the fear of a wage-price spiral weighs on the Fed.

Additionally, it is widely believed that there is a tradeoff between employment and inflation. Known as the Phillips curve, it shows that unemployment and inflation are inversely related, with the latter increasing as the former declines. Because of this, if the Fed perceives the current labor market as strong, they may raise interest rates to cool the economy.

The labor market is tight and in a strong place for workers in general. The 1.6x Black/white unemployment ratio remains below its historic 2x ratio. The level of inflation in housing for homeownership and renting threatens to continue the decades-old crisis of a lack of affordable housing. The upcoming Federal Reserve meeting will once again highlight the tension of the Fed’s mandate to both maintain full employment (which many communities still do not experience) and to restrain inflation. The possible increase in interest rates to “cool” the economy is a euphemism for increasing unemployment and handing workers pink slips. For communities with historically higher rates of unemployment and great financial insecurity, cooling the economy could also become a means of maintaining great inequality and insecurity for historically marginalized communities like African Americans and Latinos. 

To learn more about progress and lack of progress for the African American community 60 years after the March on Washington for Jobs and Freedom, see: Still A Dream: Over 500 Years to Black Economic Equality.

Joseph Dean is NCRC's Racial Economic Junior Research Specialist.
Dedrick Asante-Muhammad is NCRC's Chief of Organizing, Policy, and Equity.


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