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March Jobs Report: Strong, if slowing, labor market continues as Black unemployment falls to a record low

April 9, 2023

In March, employers added 236,000 jobs as the economy continued to expand. Job growth is slowing, with most job growth in the past month occurring in the sectors that have been the slowest to recover from the pandemic. The unemployment rate ticked down to 3.5%, which is what it has averaged in 2023. Labor force participation rose for the fourth month in a row, reaching a new post-pandemic high. Over the past two years, the labor force participation rate has risen by 1.1 percentage points, bringing nearly 3 million people into the workforce.

“This report overall shows that the economy is slowing, at the kind of steady pace that could be consistent with a soft landing in which inflation comes down without widespread job loss. Wage growth and job growth is slowing. Sectors that grew a lot post-pandemic are shrinking slightly, while those that have yet to fully recover are continuing to grow,” said Betsey Stevenson, economist at the University of Michigan’s Gerald R. Ford School of Public Policy

1. The Black unemployment rate hit an historic low this month, but the bigger story is how over the past year declining Black unemployment has kept the overall unemployment rate low.

For most groups of people, the unemployment rate in March remained slightly elevated compared to February 2020. Male unemployment is slightly higher today, driven by higher unemployment rates for Hispanic and White men compared to February 2020. Among women, White women’s unemployment rate is higher today than in February 2020.

So how did the unemployment rate recently hit a 50-year low, when it isn’t even below February 2020 levels for most groups? That decline was driven by substantial declines in the Black unemployment rate. Black men’s unemployment rate is nearly a full percentage point lower than it was in February 2020, while Black women’s unemployment rate is 0.6 percentage points lower.

This decline in the Black unemployment rate has happened at a time when Black labor force participation has increased, soaring well above White labor force participation.

Our tight labor market reflects dramatic improvements for both Black men and women. However, their unemployment rate remains well above that of White men and women.

2. Urban areas have thriving labor force participation rates, while rural areas are struggling to recover.

Urban areas have long had higher labor force participation rates among prime-age workers (those ages 25 to 54) compared to rural areas. That gap has widened, however, as urban areas have experienced a more rapid return to work among their residents. While the prime-age labor force participation rate is continuing to grow in rural areas, it remains well below pre-pandemic levels. More worrisome is that the growth in labor force participation has slowed in recent months.

In contrast, there is no evidence of slowing growth in labor force participation in metropolitan areas. A gap has emerged in labor force participation between the 10 metropolitan areas with the largest populations and smaller metropolitan areas. Prior to the pandemic, labor force participation rates among both groups were similar. While both experienced similar declines in labor force participation, the larger metro regions have recovered more strongly, far exceeding pre-pandemic levels.

The problem of low labor force participation in rural areas is even more pronounced when the total adult population is considered. Rural areas have more older people, and older people in rural areas have lower labor force participation rates than older people in urban areas. Overall, despite the shock of remote work, cities are recovering more strongly than rural areas, at least when measured by the share of residents with jobs or looking for work.

3. The working-age foreign-born population has almost recovered to its pre-pandemic trend.

The pandemic was a shock to the movement of people around the globe. In much of the world, including the United States, COVID-19 pandemic policy responses included rules restricting migration. In the United States, limits were imposed on green cardsasylum claims, and many other kinds of legal immigration. Illegal immigration enforcement was re-oriented to the border, where asylum seekers and other immigrants were turned away en-masse.

Beyond rules barring the movement of people, people were drawn home or discouraged by job prospects in the United States. The result was a large decline in the working-age foreign-born population both overall and relative to a decades-long pre-pandemic trend.

The decline in the working-age foreign-born population started prior to the pandemic, with a notable drop in 2019. COVID-19 and related measures helped extend this downward slide. By October 2020, there were 2.6 million fewer foreign-born workers compared to the previous (2010-2019) trend. Throughout the pandemic, excess job openings were especially prevalent in industries that rely heavily on migrant labor.

In the middle of 2021, a large gap in the number of foreign-born workers remained, but it began to rapidly close. By the end of 2021, the level had recovered among both male and female foreign-born workers to that seen prior to the pandemic. However, the number of foreign-born workers remained well below what would have been expected by the pre-pandemic trend. In 2022, growth in male foreign-born workers continued and by the end of the year had fully recovered to the trend line. However, the female foreign-born working-age population has largely stagnated and remains well below the pre-pandemic trend.

Continued growth in foreign-born workers is one of the key components to sustaining job growth while bringing down inflation. Policies that encourage immigration can help support ongoing job growth.

4. The labor force participation recovery has been strongest among those ages 35 to 44.

Labor force participation fell across the board with the pandemic, but it has recovered among prime-age people (those ages 25 to 54). In March, the labor force participation rate of prime-age people held steady at 83.1%over the previous month. This is slightly higher than in February 2020 and well above its 2019 average.

Prime- age workers have driven the labor force participation rate recovery, but that primarily reflects a surge in participation among women ages 35 to 54. And the growth was particularly driven by women. In March 2023, 77.5% of 35- to 44-year-old women were in the labor force compared to 76.4% in February 2020. In comparison male labor force participation in this age group has ticked up by only 0.1 percentage points. While labor force participation has fallen for men ages 45 to 54, it has risen among women in that age group.

Older workers are much less likely to work today than prior to the pandemic, and there is little evidence of recovery in the labor force participation rates of either older men or older women.

Among people under age 24, labor force participation rates are lower today for women, while they are higher for men. This is a more difficult trend to assess because historically, higher rates of attending school have been associated with lower rates of labor force participation. Therefore some of these differences may reflect educational decisions.

5. Of the jobs added this month, 50% came from two sectors with employment still well below pandemic levels: government and leisure and hospitality.

The public sector has been slow to recover from the pandemic. Employment remains at 98.6% of February 2020 levels, despite the addition of 47,000 jobs in March 2023. After stagnating between the summers of 2021 and 2022, public sector job growth picked up in the summer of 2022 and has steadily grown since. Over the past three months, the public sector has added 226,000 jobs, with growth occurring at all levels of government.

In the private sector, employment in leisure and hospitality added 72,000 jobs, continuing to chip away at the gap between current employment in the sector and employment prior to the pandemic.

While neither the public sector nor leisure and hospitality has fully recovered to pre-pandemic employment, they have driven recent growth as the labor market continues to adjust to the widespread fluctuations and reallocation across sectors that occurred in the wake of the pandemic.

More generally, the goods-producing sector lost 7,000 jobs this month and yet employment in the sector remains well above pre-pandemic levels. Private sector job growth this month was driven entirely by the services-producing sector. The level of jobs in the services-producing sector is currently well above pre-pandemic levels and even exceeds that of the goods-producing sector. However, job growth has been concentrated almost exclusively in the services-producing sector over the past 50 years. So while services-producing sector employment is above pre-pandemic levels, it remains well below the pre-pandemic trend. In the decade prior to the pandemic, much of the job growth in services-producing sector happened in two sectors: leisure and hospitality, and education and health services. These two sectors have been the slowest to recover, although they have driven job growth in recent months.

About this analysis

The University of Michigan’s monthly Rapid Insights labor market analysis is conducted by Betsey Stevenson, economist at the Gerald R. Ford School of Public Policy; and Benny Docter, senior data and policy analyst at Poverty Solutions. The project is funded by the Robin Hood Foundation, with support from the Ford School and Poverty Solutions.