August jobs report shows declining participation among Black workers

The August jobs report showed the U.S. unemployment rate rise across the board. Meanwhile, Black workers marked the only demographic to see their labor force participation fall.

The unemployment rate rose 0.2 percentage point to 3.7% in August, according to data released Friday by the U.S. Bureau of Labor Statistics. Nonfarm payrolls came in at 315,000 and fell in line with estimates of 318,000.

While all demographic groups saw the unemployment rate tick up slightly, it rose at a sharper pace for both Hispanic and Black workers to 4.5% and 6.4%, respectively, from 3.9% and 6% in July.

However, Black workers marked the only group that saw labor force participation decline, while the group’s employment-population ratio, which measures what percentage of the population holds a job, also fell.

“There is some volatility in these numbers but seeing a downward trend in employment and participation is worrisome,” said Elise Gould, senior economist with the Economic Policy Institute.

For August, Black labor force participation fell to 61.8% from 62% in July, while the employment to population ratio dipped to 57.9% from 58.3%

William Spriggs, chief economist to the AFL-CIO, said that looking at Black workers is one way to gauge and understand what’s really happening among employers.

Black workers across the board face more discrimination than many other groups, which could be one explanation, he said. A potential slowdown in hiring — as evident through this week’s ADP private payrolls data — could also be a contributor to these results.

“When firms slow their hiring rate, that hit Black workers immediately because they’re already in line the longest to try and find a job,” Spriggs said. “What’s happened is the queue’s just gotten longer so the discouraged worker effect is much more acute for Black workers.

While it’s too early to assign a specific cause to the declining labor force participation among Black workers, Gould said the continued downward trend in recent months may signal something other than “a statistical anomaly.”

That said, the Federal Reserve’s campaign to quickly raise rates to tame surging prices may be causing more damage to the labor market, which tends to appear among historically disadvantaged groups like Black workers.

“Black workers are beginning to feel the brunt of it in a disparate fashion,” said Michelle Holder, a distinguished senior fellow at Washington Center for Equitable Growth. “Now, this is one report, but I pretty much believe that this is going to be the pattern over the next few months, particularly if the Fed continues to aggressively implement its approach.”

Like others, Holder agrees that it’s too early to attribute a cause to the decline in Black labor force participation, but called attention to rising unemployment among Black female workers.

The group saw its unemployment rate rise from 5.3% in July to 5.9%. In comparison, white female workers saw their unemployment rate tick up to 2.8% from 2.6%.

Hispanic female workers also experienced a sharp increase in their unemployment rate, rising to 4.3% from 3.2% in July.

While the unemployment rate did rise at a faster clip among Hispanic workers compared to white workers and the overall jobs market, the group’s labor force participation rate and employment trend seem to mimic the broader market, Gould said.

“We’re seeing this rise in unemployment as accompanied by a significant increase in participation and then uptake as well in employment,” she said. “I think that’s a hopeful sign. The fact that the unemployment rate moves up is not a troubling thing on its own.”

—CNBC’s Gabriel Cortes contributed to this report.