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ADVOCACY & POLICY UPDATE - August 22nd, 2022

U.S. Labor Market Shows Signs of Slowing

Washington Update


The bipartisan CHIPS and Science Act recently signed into law by President Biden includes funds designed to transform centers of innovation in the U.S. Instead of funding traditional technology centers like Silicon Valley in Northern California, the legislation will form technology hubs in several other locations across the country, including small and rural areas.

Specifically the law provides $10 billion over five years to create 20 regional technology and innovation hubs, and it specifies the hubs cannot be in places “that are now leading technology centers” - bringing hope to small cities around the country that it will create jobs in their communities. The law requires the Department of Commerce to “ensure geographical and demographic diversity” by creating at least three hubs in each of the U.S. Economic Development Administration’s six regional offices.

At least a third of the hubs will have to “significantly benefit a small and rural community,” which the law defines as a metropolitan area with no more than 250,000 people. In addition, at least one of the 20 hubs has to be in a low-population state that does not have an urbanized area with at least 250,000 people. A 2019 Brookings Metro report found that because industries tend to cluster together, between 2005 and 2017, 90% of the increase in jobs in industries that rely on innovation occurred in only five “superstar” metropolitan areas -- Boston, San Francisco, San Jose, Seattle and San Diego. The new legislation attempts to address this clustering.

The CHIPS Act also includes $1 billion in block grants for economic development in persistently distressed communities through development of the new RECOMPETE pilot program. This funding can support workforce development to implement regional semiconductor innovation strategies, including community college programs and those designed by other educational organizations that partner with local businesses. It can also be used to serve workers in low-income neighborhoods and to create job training and placement services in sites such as churches, housing projects and community advocacy programs, as well as to support entrepreneurs.

In addition, the CHIPS law requires that networks of institutions and groups in a region band together to figure out what they would do if they were to become a semiconductor research hub. Mandatory collaborators include: labor and workforce training organizations; economic development organizations; higher education institutions; technology or manufacturing companies; and state, local or tribal governments.

DOL Job Training Programs

On Thursday, August 18, the U.S. Department of Labor (DOL) Employment and Training Administration (ETA) announced that four existing job training programs - Reentry Employment Opportunities program, YouthBuild, Job Corps, and the Workforce Opportunity for Rural Communities program - will be part of the Justice40 initiative. Justice40 is the White House’s plan to deliver 40 percent of federal investments, including through training and workforce development programs, to disadvantaged communities. In January 2021, President Biden’s Executive Order on Tackling the Climate Crisis at Home and Abroad directed all federal departments to review programs for inclusion in the Justice40 initiative as part of a whole-of-government initiative to advance environmental justice.

House Education and Labor Committee

Congresswoman Virginia Foxx (NC), the top Republican on the House Education and Labor Committee, is looking for a term-limit waiver, which would allow her to head the committee if her party takes the majority in the House after the November midterm elections. According to Foxx, she doesn’t have any opposition to the waiver. Congresswoman Elise Stefanik (NY) was rumored to be interested in heading the committee, before a report indicated she would instead run for a House GOP leadership position.

U.S. Labor Market

Earlier in the year the economy was seeing a record two jobs for every worker seeking one, with about 4.5 million workers quitting back in March and layoffs at their lowest level since the government started tracking it. Unfortunately that era for workers when wage growth exploded and employees had the upper hand seems to be coming to a close. The labor market is showing signs of returning to pre-pandemic conditions as the Federal Reserve moves forward with efforts to slow the economy and stave off inflation.

More workers are filing jobless insurance claims, fewer are quitting and more employers are reducing hiring. There was hope from worker advocates that the labor market was undergoing a long-term transformation, yet it seems clear the shift during the pandemic was temporary. Wage growth and the overall economy are still strong so the slowdown is constrained enough that a recession is likely a way off, but other data shows the gradual cooling is unlikely to let up.

There is also a fear that layoffs, while relatively low at the moment, will start picking up. Economists theorize that employers might be avoiding firing workers despite slowing demand. Labor productivity has declined more over the last two quarters than ever before – a sign that growing employment is increasingly unsustainable.

The labor force participation rate dropped again in July to 62.1 percent, a growing number of workers are filing for unemployment each week and more people were working part time than in the previous month. Fewer workers are leaving their jobs without another position lined up.

The labor market lacks some of the safety rails that would mitigate the cooling already underway - notably a comprehensive child-care infrastructure, which would allow more women to fully participate in the workforce. There were approximately 88,000 fewer child care workers in July than there were pre-pandemic, which amounts to about 8 percent of the workforce. More women who were unemployed in June dropped out of the labor force in July than found jobs. At the same time, 6.13 million workers were not working at the beginning of the month because they were caring for a child not in school or daycare.

State Employment and Unemployment Summary

On Friday, August 19, the U.S. Department of Labor (DOL) Bureau of Labor Statistics (BLS) released the State Employment and Unemployment Summary. According to the report, last month unemployment rates were lower in 14 states and the District of Columbia, higher in 3 states, and stable in 33 states. Nonfarm payroll employment increased in 20 states, decreased in 2 states, and was essentially unchanged in 28 states and the District.

Click here to access the full report.

Initial Jobless Claims

In the week ending August 13, the advance figure for seasonally adjusted initial claims was 250,000, a decrease of 2,000 from the previous week's revised level. The previous week's level was revised down by 10,000 from 262,000 to 252,000. The 4-week moving average was 246,750, a decrease of 2,750 from the previous week's revised average. The previous week's average was revised down by 2,500 from 252,000 to 249,500. The advance seasonally adjusted insured unemployment rate was 1.0 percent for the week ending August 6, unchanged from the previous week's unrevised rate. Unemployment claims fell for the first time in three weeks, according to the report. Additionally, BLS found that in July job opening rates decreased in 17 states, increased in 2 states, and were little changed in the remaining states when compared to June.

Click here to access the report.

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