Tight labor market continues in 2018 as the unemployment rate falls to a 49-year low

The Nation’s current economic expansion entered its ninth year in 2018. By the end of the year, the economy had grown for 114 months since the end of the Great Recession in June 2009—the second longest economic expansion on record.[1] Reflecting this sustained period of economic growth, the U.S. labor market showed continued strength during the year. Steady job growth continued, and the unemployment rate (the number of unemployed people as a percentage of the labor force) fell to a 49-year low. An indepth look into data from the Current Population Survey (CPS) revealed an array of labor market indicators pointed to continued labor market improvement during the year.[2] The employment–population ratio (the number of employed people as a percentage of the civilian noninstitutional population age 16 and older) continued to rise, and the number of long-term unemployed continued to decrease.[3] The survey data also showed that workers in most demographic groups experienced rising employment and declining unemployment in 2018.[4]

This article describes several important developments or issues related to the U.S. labor market in 2018. It examines the employment situation of people by sex, race, Hispanic or Latino ethnicity, age, educational attainment, veteran status, disability status, and nativity. In addition, the article summarizes changes in other CPS measures used to gauge the health of the labor market in 2018—such as involuntary part-time work, alternative measures of labor underutilization, unemployment by reason and duration, employment and unemployment by occupation, and median usual weekly earnings.

Employment situation

The unemployment rate declined to a 49-year low in 2018. In the fourth quarter of 2018, the jobless rate was 3.8 percent—the same rate recorded in the third quarter of 2018. This unemployment rate was the lowest since the fourth quarter of 1969.[5] The number of unemployed people was down by 472,000 over the year to 6.1 million in the fourth quarter. (See table 1 and figure 1.)

Employment grew by about 2.8 million in 2018, reaching 156.8 million in the fourth quarter of 2018. Furthermore, the employment–population ratio increased in 2018, to 60.6 percent in the fourth quarter. The ratio has been on an upward trend since 2014. (See table 1 and figure 2.)

In the last quarter of 2018, the civilian labor force participation rate—the number of people in the labor force as a percentage of the civilian noninstitutional population age 16 and older—at 63.0 percent changed little from a year earlier. The participation rate has remained fairly flat for the past 5 years. (See table 1 and figure 2.)

Jobless rates declined for most demographic groups

For most demographic groups in 2018, the employment situation continued to improve. Many groups experienced unemployment rates that were low by historical standards, and some groups had jobless rates that were at all-time lows. In 2018, unemployment rates declined for men and women (age 16 and older). The rate for Blacks or African Americans was at an all-time low, as was the rate for people of Hispanic or Latino ethnicity. By educational attainment, jobless rates for high school graduates and people with some college or an associate degree declined in 2018. The jobless rate also declined for foreign-born individuals but changed little over the year for veterans and people with a disability.

Labor market improved for both men and women

In 2018, both men and women (age 16 and older) experienced labor market improvements. The unemployment rate for men declined by 0.4 percentage point over the year to 3.8 percent in the fourth quarter of 2018. The jobless rate for women declined by 0.2 percentage point to 3.8 percent. The employment–population ratio for women (55.2 percent in the fourth quarter of 2018) increased over the year, while the ratio for men (66.4 percent in the fourth quarter of 2018) changed little. In the fourth quarter of 2018, the labor force participation rate for women rose from 56.9 percent to 57.4 percent, whereas the participation rate for men (69.0 percent) was unchanged over the year. The participation rate for men has always been higher than the participation rate for women, although the gap between the two has narrowed over the past several decades. (See table 1.)

The employment situation by race and ethnicity: jobless rates for Blacks and Hispanics reached series lows

Whites experienced declining unemployment and expanding employment in 2018. The unemployment rate for Whites declined by 0.2 percentage point over the year. While the fourth-quarter rate for Whites was 3.4 percent, the third-quarter rate of 3.3 percent was the lowest quarterly rate since the fourth quarter of 1969. Strong employment gains for Whites were reflected in their employment–population ratio. The employment–population ratio for Whites rose by 0.4 percentage point to 60.8 percent in the fourth quarter of 2018. However, the labor force participation rate for this group (63.0 percent) changed little over the year. (See table 1 and figure 3.)

Likewise, unemployment continued to decline for Blacks, and their employment rose in 2018. After reaching 16.5 percent in the first quarter of 2010, the unemployment rate for Blacks declined to 6.3 percent in the fourth quarter of 2018, the same rate as that in the previous two quarters and the lowest rate on record (comparable data for this group begin in 1972). In addition, the rate for Blacks was down by 0.8 percentage point over the year. However, even with this improvement, the unemployment rate for Blacks remained considerably higher than the rates for Asians and Whites. Although employment for Blacks rose during the year, the growth just kept pace with their population growth. As a result, the employment–population ratio for Blacks (58.3 percent) changed little in 2018. However, the ratio had been trending up for this group in recent years. The labor force participation rate for Blacks (62.2 percent) was unchanged from the prior year.

The employment situation for Asians was little different in 2018 than it was in 2017. Their unemployment rate (3.0 percent in the fourth quarter of 2018) changed little over the year but had remained under 4 percent over the past three-and-a-half years.[6] The employment–population ratio for Asians, at 62.0 percent, changed little over the year, and the labor force participation rate, at 64.0 percent, also showed little change in 2018.

For people of Hispanic or Latino ethnicity, the employment situation continued to improve in 2018. The unemployment rate for Hispanics was 4.4 percent in the fourth quarter of 2018; this rate was a series low (data for this group begin in 1973).[7] The employment–population ratio for Hispanics rose to 63.7 percent in the fourth quarter of 2018. The ratio has been on an upward trend since 2011. The labor force participation rate for Hispanics rose over the year, to 66.7 percent in the last quarter of 2018. Hispanics had the highest participation rate among the major race and ethnicity groups. This higher participation rate may partly reflect Hispanics’ larger share of 25- to 54-year-olds, who are most likely to participate in the labor force.[8]

Unemployment declined and employment expanded for most age groups

Unemployment declined and employment expanded for most age groups in 2018. Among youth ages 16 to 24, the unemployment rate was 8.4 percent in the fourth quarter of 2018, a decrease of 0.8 percentage point from the prior year. This represents the lowest rate since the second quarter of 1969. Within this age group, teenagers (ages 16 to 19) continued to experience a higher unemployment rate, at 12.2 percent, nearly double the rate for young adults (ages 20 to 24), at 6.8 percent. (See table 2.)

The labor force participation rate for people ages 16 to 24 has remained fairly flat since 2010. In the fourth quarter of 2018, the participation rate for youth ages 16 to 24 was 55.0 percent. The employment–population ratio, however, has been trending up since 2010. The ratio in the last quarter of 2018 was 50.4 percent.

Among youth ages 16 to 24, young adults (ages 20 to 24) were about twice as likely to participate in the labor force as teenagers. The participation rate for young adults was 70.5 percent in the fourth quarter of 2018, little changed over the year. In the fourth quarter of 2018, the participation rate for teenagers was 35.6 percent, up by 0.9 percentage point from a year earlier.

By sex, teenagers and young adults have different trends in labor force participation. Teenage men and women had similar participation rates, at 34.3 percent and 36.9 percent, respectively, in the fourth quarter of 2018. Conversely, young adult men had a slighter higher rate than that of young adult women. In the fourth quarter of 2018, the participation rate for young adult men was 72.1 percent and the rate for young adult women was 68.9 percent. (See table 3.)

Among prime-working-age people (that is, 25- to 54-year-olds), the unemployment rate declined by 0.2 percentage point over the year to 3.2 percent in the fourth quarter of 2018. Over the year, the jobless rate for prime-working-age women decreased by 0.4 percentage point to 3.2 percent in the fourth quarter of 2018, while the rate, at 3.1 percent, changed little for prime-working-age men. (See table 2.)

Employment for people of prime working age continued to expand in 2018. The employment–population ratio for this group was up by 0.7 percentage point over the year to 79.7 percent in the fourth quarter of 2018. The ratio for prime-working-age men rose from 85.8 percent in the fourth quarter of 2017 to 86.3 percent in the fourth quarter of 2018. The ratio for prime-working-age women increased from 72.3 percent in the fourth quarter of 2017 to 73.3 percent in the fourth quarter of 2018.

The labor force participation rate for people of prime working age edged up from 81.8 percent in the fourth quarter of 2017 to 82.3 percent in the fourth quarter of 2018. Among prime-working-age men, the participation rate changed little in 2018, finishing the year at 89.0 percent. The participation rate for prime-working-age women increased over the year to 75.8 percent in the fourth quarter of 2018. The gap between the participation rates for prime-working-age men and women has been around 14 percent since 2008.

Among older workers (those age 55 and older), the jobless rate declined by 0.3 percentage point to 2.9 percent in the fourth quarter of 2018. Both older men and older women had similar unemployment rates by the end of the year. While the jobless rate for older men declined to 2.8 percent in the final quarter of the year, the rate for older women, at 2.9 percent, was little changed over the year.

After trending up since the mid-1990s, the employment–population ratio for older workers experienced a slight decline during the Great Recession (fourth quarter of 2007 through second quarter of 2009). Shortly after the recession, the employment–population ratio for older workers resumed its upward trend. In the fourth quarter of 2018, the ratio for older workers was 39.0 percent. Older men had an employment–population ratio of 44.9 percent in the fourth quarter of 2018, and older women had a ratio of 34.0 percent.

The labor force participation rate for older workers generally has been flat for the last 5 years. In the fourth quarter of 2018, their participation rate was 40.2 percent. The participation rates for both older men and older women have been relatively steady in recent years. Older men were more likely to participate in the labor force than older women (46.2 percent and 35.0 percent, respectively, in the fourth quarter of 2018).

Among older workers (those ages 55 and older), those ages 55 to 64 have a much higher labor force participation rate than the rate of those age 65 and older. These two older age groups also have different patterns in terms of labor force participation. For those ages 55 to 64, the labor force participation rate rose steadily from the mid-1980s, until it began to flatten out in 2009. In recent years, the participation rate for this group has resumed its upward trend. The labor force participation rate for those ages 55 to 64 was 65.3 percent in the fourth quarter of 2018. (Data for those ages 55 to 64 and those age 65 and older are not seasonally adjusted.) In contrast, the participation rate for those age 65 and older has continued to rise since the late 1990s, albeit at a slower pace since 2012. (See table 3.)

Jobless rates declined for high school graduates and those with some college or associate degree

Among those age 25 and older, the unemployment rates for high school graduates (no college) and those with some college or associate degree declined in 2018.[9] The jobless rate for high school graduates (no college) fell by 0.5 percentage point over the year to 3.8 percent in the fourth quarter of 2018. The jobless rate for people with some college or an associate degree declined by 0.4 percentage point from a year earlier to 3.2 percent in the last quarter of 2018. The unemployment rates for those with less than a high school diploma (5.8 percent) and people with a bachelor’s degree and higher (2.1 percent) were unchanged over the year. (See table 4 and figure 4.)

Unemployment rate declined for nonveterans but changed little for veterans

Of the 19.1 million veterans in the civilian noninstitutional population in the fourth quarter of 2018, the largest share—about 40 percent—served during World War II, the Korean War, and the Vietnam era (7.5 million). Another 4.2 million served during Gulf War era II, and 3.1 million served during Gulf War era I. There were 4.3 million veterans who served on Active Duty outside these designated wartime periods. Among veterans from all service periods, women accounted for about 10 percent of the total veteran population in the fourth quarter of 2018.[10]

The unemployment rate for all veterans changed little over the year (3.0 percent in the fourth quarter of 2018), while the jobless rate for nonveterans decreased to 3.5 percent. (Data are not seasonally adjusted.) The unemployment rates for male (3.1 percent) and female (2.7 percent) veterans were little different in the fourth quarter of 2018 than the rates a year earlier. (These rates were also not statistically different from each other.) The jobless rate for male Gulf War-era II veterans (3.4 percent) and female Gulf War-era II veterans (3.3 percent) were also little different from the rates a year earlier. (See table 5.)

In the fourth quarter of 2018, 49.3 percent of veterans participated in the labor force, while 65.5 percent of nonveterans participated in the labor force. Both measures were little changed from the fourth quarter of 2017. The difference in labor force participation rates between veterans and nonveterans reflects the age profile of veterans who served during World War II, the Korean War, and the Vietnam era, all of whom are now over age 60. Labor force participation rates—whether for veterans or for nonveterans—tend to be lower for older people than the rates for those of prime working age. For instance, the labor force participation rate for those who served during World War II, the Korean War, and the Vietnam era was 21.0 percent in the fourth quarter of 2018. In contrast, Gulf War-era II veterans—who tend to be younger—had a much higher participation rate (81.7 percent in the fourth quarter of 2018). Both measures were little different from the measure of the prior year.

Labor market improved for people without a disability but changed little for those with a disability

Labor market indicators for people with a disability changed little in 2018, although recent years have seen some modest improvements. Out of the 30.3 million people age 16 and older with a disability in the fourth quarter of 2018, 6.4 million, or 21.1 percent, participated in the labor force, much lower than the rate of 68.4 percent for people with no disability. (Data are not seasonally adjusted.) The lower participation rate for people with a disability, compared with the participation rate of those with no disability, reflects, in part, the older age profile of those with a disability. About half of all people with a disability were age 65 and older, nearly 3 times the share of those with no disability. The labor force participation rates for both people with and without disabilities changed little over the year. (See table 6.)

The employment–population ratio for people with a disability, at 19.4 percent, changed little from the fourth quarter of 2017 to the fourth quarter of 2018. People without a disability tend to have a much higher employment–population ratio than people with a disability. The employment–population ratio for those without a disability was 66.1 percent in the final quarter of 2018, up by 0.5 percentage point.

The unemployment rate for people with a disability was little changed over the year, at 7.7 percent in the last quarter of 2018. Nevertheless, the rate for this group was still more than double than the rate for people without a disability (3.4 percent in the fourth quarter of 2018). The jobless rate for people with a disability generally has been trending down for several years and fell to a series low in 2018 (averaging 8.0 percent for the year). The unemployment rate for those without a disability declined over the year.[11]

Unemployment rates declined for both native- and foreign-born individuals

The foreign born accounted for 17.5 percent of the U.S. civilian labor force age 16 and older in the fourth quarter of 2018.[12] The unemployment rate for foreign-born individuals declined to 3.2 percent over the year, and the rate for native-born people declined to 3.7 percent. (Data are not seasonally adjusted.) (See table 7.)

Foreign-born individuals continued to have a slightly higher labor force participation rate than that of native-born individuals in 2018. Both the labor force participation rate for the foreign born, at 66.1 percent in the fourth quarter of 2018, and the participation rate for the native born, at 62.2 percent, were little changed over the year.

A deeper look at unemployment and employment

The next section examines the unemployed by their duration and reason for unemployment. It also looks more closely at unemployment and employment by occupation. One takeaway is that even though unemployment rates have declined to the lowest levels in nearly 50 years, many of those who are unemployed have been without work for an extended period. For example, many unemployed people have been actively searching for a job for 27 weeks, 52 weeks, or even 99 weeks and longer. At the same time though, the number of unemployed job losers continued to decline and employment rose for most major occupational categories in 2018.

Unemployment declined for people who lost their job or completed a temporary job

Unemployed people in the CPS are defined as those age 16 and older who meet all the following criteria: had no employment during the survey reference week, actively searched for work in the prior 4 weeks, and are currently available for work. As previously noted, 6.1 million people were classified as unemployed in the fourth quarter of 2018. Unemployed people are grouped by reason for their unemployment. People are unemployed because they either (1) were on temporary layoff, permanently lost their job, or completed a temporary job; (2) left their job; (3) reentered the labor force (reentrants); or (4) entered the labor force for the first time (new entrants). (See table 8 and figure 5.)

The number of unemployed people who lost their job or who completed temporary jobs declined by 352,000 over the year to 2.9 million in the fourth quarter of 2018, at which time they accounted for 46.8 percent of the unemployed. The number of reentrants—unemployed people who previously worked but were out of the labor force prior to beginning their job search—changed little in 2018, at 1.9 million in the fourth quarter. Reentrants, the second largest group among the unemployed when viewed by reason for unemployment, comprised 31.3 percent of the unemployed in the fourth quarter of 2018. The number of job leavers (people who voluntarily left their job), at 755,000, was essentially unchanged over the year. Job leavers comprised 12.3 percent of the unemployed in the last quarter of 2018. Lastly, new entrants totaled 590,000 in the fourth quarter of 2018—little changed over the year. These individuals accounted for 9.6 percent of the unemployed.

Long-term unemployment decreased but remained elevated by historical standards

The number of people experiencing long-term unemployment (those who had been looking for work for 27 weeks or longer) decreased in 2018. In the fourth quarter of 2018, 1.3 million people were long-term unemployed, down by 267,000 over the year. The long-term unemployed comprised 21.2 percent of the total unemployed in the fourth quarter of 2018. This proportion was down by 2.5 percentage points over the year. Despite this decline, the proportion of the long-term unemployed was still above the prerecession level of 17.8 percent registered in the third quarter of 2007, clearly indicating that some people are still having great difficulty finding a job. Moreover, in the fourth quarter of 2018, 13.7 percent of unemployed people had been looking for work for a year or more and 5.9 percent had been searching for work for more than 99 weeks, or almost 2 years. These figures also remain above prerecession levels. (Data for those unemployed for 52 weeks or longer and 99 weeks or longer are not seasonally adjusted.) (See table 8 and figure 6.)

All five major occupational categories experienced jobless rate declines

In 2018, unemployment rates declined for all five major occupational categories.[13] (Data are annual averages.) Management, professional, and related occupations continued to have the lowest unemployment rate among the five major occupational groups in 2018; the rate for this occupational category was 2.1 percent in 2018, down by 0.1 percentage point from the rate in 2017. The jobless rate for sales and office occupations was 3.8 percent in 2018, down by 0.3 percentage point. Production, transportation, and material moving occupations had a jobless rate of 4.5 percent in 2018, down by 0.9 percentage point. The jobless rate for service occupations declined by 0.6 percentage point to 4.8 percent in 2018. Natural resources, construction, and maintenance occupations had an unemployment rate of 5.1 percent in 2018. The rate for this occupational category declined by 0.9 percentage point from 2017 to 2018. (See table 9.)

Employment rose for most major occupational categories

Employment rose in three of the five major occupational groups. From 2017 to 2018, employment in production, transportation, and material moving occupations expanded by 612,000, or 3.4 percent, to 18.5 million. Employment in management, professional, and related occupations rose by 1.5 million—or 2.5 percent—to 62.4 million in 2018. Employment in natural resources, construction, and maintenance occupations also experienced gains from 2017 to 2018, increasing by 278,000 to 14.5 million; this occupational group grew by 2.0 percent from 2017 to 2018. Employment in sales and office occupations and in service occupations changed little from 2017 to 2018. (See table 10.)

Other barometers used to gauge labor market health

Additional CPS measures are widely used to provide further insight into the U.S. labor market performance. These supplementary measures—including the number of people who work part time for economic reasons (also known as involuntary part-time workers), various measures of people not in the labor force (such as people marginally attached to the labor force and discouraged workers), alternative measures of labor underutilization, and labor force flows—shed more light on U.S. labor market developments in 2018.

Number of involuntary part-time workers declined

The number of people employed part time for economic reasons—those who work 1 to 34 hours a week for an economic reason—is a key cyclical labor market indicator, and it may also provide clues into structural changes that occur in the U.S. economy. For example, some research has suggested that the rise in involuntary part-time workers reflects “advances in technology and globalization” and “changes in industry composition.”[14] These individuals are often viewed as underemployed because they prefer full-time employment, but they are working reduced hours because of unfavorable business conditions (slack work) or the inability to find full-time jobs. Over the year, the number of involuntary part-time workers declined by 232,000 to 4.7 million in the fourth quarter of 2018. Involuntary part-time workers accounted for 3.0 percent of total employment at the end of 2018. The number of people who were involuntary part-time workers because of slack work or business conditions edged down in 2018, and the number who could only find part-time work was little changed from a year earlier. (See figure 7.)

Number of people not in the labor force changed little

The labor force comprises the employed and the unemployed. The remainder—those who had no job during the survey reference week and were not actively looking for work (or on temporary layoff) in the last 4 weeks—are classified as not in the labor force.[15] In the fourth quarter of 2018, 96.1 million people were not in the labor force, little changed from a year earlier. (Data are not seasonally adjusted.) (See table 11 and figure 8.) Of those not in the labor force, about 2 in 5 were age 65 and older.

People who are not in the labor force are asked if they currently want a job. In the fourth quarter of 2018, 5.1 million, or 5.3 percent, of people not in the labor force indicated they wanted a job, even though they were not currently looking for one.

A subset of those not in the labor force who want a job are classified as marginally attached to the labor force. These individuals in this subset were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. In the fourth quarter of 2018, 1.6 million people were marginally attached to the labor force, essentially unchanged from a year earlier.

Among the marginally attached are discouraged workers—people not currently looking for work specifically because they are discouraged over their job prospects.[16] In the fourth quarter of 2018, the number of discouraged workers (445,000) was little different from the number a year earlier.

The remaining 1.1 million people marginally attached to the labor force in the fourth quarter of 2018 had not searched for work for reasons other than discouragement, such as school attendance, family responsibilities, health-related issues, and other reasons not identified separately in the CPS. The number of these individuals also changed little over the year.

Alternative measures of labor underutilization

In addition to BLS publishing the national unemployment rate each month, BLS publishes a range of alternative measures of labor underutilization: U-1, U-2, U-4, U-5, and U-6 (in this typology, the official unemployment rate is referred to as U-3).[17]

Alternative measures U-1 and U-2 are more restrictive than the official definition of unemployment. These narrower measures track groups of unemployed people who typically face some degree of financial hardship or difficulty—those unemployed for 15 weeks or longer (U-1) and those unemployed because they lost their job or completed temporary jobs (U-2). The measures U-4, U-5, and U-6 present broader gauges of labor underutilization that include some people who are underemployed or not in the labor force. Essentially, these broader measures look at more than just unemployment, bringing in a broader group of individuals with labor market difficulties.

In the fourth quarter of 2018, all alternative measures declined. U-1 and U-2 declined to 1.3 percent and 1.8 percent, respectively. U-3—the official unemployment rate—fell to 3.8 percent in the fourth quarter of 2018. Among the broader alternative measures, U-4 declined to 4.0 percent and U-5 decreased to 4.7 percent. U-6, the broadest alternative measure, declined to 7.5 percent in the fourth quarter of 2018, the same rate registered in the third quarter; this was the lowest rate since the first quarter of 2001. (See figure 9.)

Unemployment decline reflected in labor force flows

In any given month, an individual surveyed in the CPS can be classified in 1 of 3 labor force states: employed (E), unemployed (U), or not in the labor force (N). From one month to the next, an individual’s labor force status can change or remain the same. For example, a person could transition from being unemployed to employed, or an employed person could remain employed. The CPS labor force flows estimates measure these transitions each month and can help explain changes in the unemployment rate.[18] In 2018, 15.8 million people, or 6.1 percent of the population age 16 and older, changed their labor force status in an average month.

Among the unemployed, the likelihood of a person remaining unemployed (UU) over the month continued to trend down in 2018. In times of economic expansion, the likelihood of a person remaining unemployed over the month usually decreases. In December 2018, 47.6 percent of those who were unemployed in November remained unemployed, down from a peak of 65.4 percent in December 2009. (Data are seasonally adjusted 3-month moving averages.)

Before the Great Recession, those who were unemployed had been more likely to find employment than to leave the labor force (26.9 percent and 23.0 percent, respectively, in November 2007). During the recession, the share of those unemployed who left the labor force became higher than the share of those who found employment. Since 2016, the unemployed have been more likely to find a job than to leave the labor force. In December 2018, the likelihood of an unemployed person finding a job (UE) was 28.4 percent and the likelihood of an unemployed person leaving the labor force (UN) was 24.0 percent. (See figure 10.)