As the U.S. economy continues to outperform expectations, the March jobs report showed that employers added 303,00 positions for the month with an unemployment rate of 3.8%. For the first time, hospitality and leisure has returned to its pre-pandemic level after adding 49,000 jobs. (Photo by Spencer Platt/Getty Images)

Policy, politics and progressive commentary

The sturdy labor market continued to chug along in March, with an unemployment rate of 3.8%, marking the 26th straight month of an unemployment rate under 4%.

The economy added 303,00 jobs, according to the monthly report released by the Bureau of Labor Statistics on Friday. Economists, researchers, and policy experts say that the strong but no longer hot labor market should be encouraging news for the Fed as it decides whether to cut rates after a long campaign to fight inflation.

Aaron Sojourner, an economist and senior researcher at the W.E. Upjohn Institute for Employment Research, a nonprofit research organization headquartered in Kalamazoo, Michigan, said the labor market is “strong and healthy.”

“It’s remarkable that the economy added over 300,000 jobs at this point and job growth seems to be accelerating,” Sojourner said.

Which sectors are adding jobs?

Health care and government continued to add jobs in March, with the two sectors adding above their average monthly gains, at 72,000 and 71,000.

Elise Gould, senior economist at the Economic Policy Institute, an economic policy think tank based in Washington D.C., said government is a sector economists will be looking to see more growth in education jobs. She added that public sector workers can fuel private sector employment growth as well.

For the first time, hospitality and leisure has returned to its pre-pandemic level after adding 49,000 jobs. Researchers and economists took this development as a good sign for the economy and for workers. Gould said it was a “great milestone” but also noted that many sectors have already hit that level and more.

Sojourner said it may be a good sign that it took this long for leisure and hospitality to return to this employment level.

“The fact that it didn’t immediately recover is in a sense, good news, because a lot of people found better opportunities outside the sector and employers had to raise wages and the quality of the jobs that they were offering in order to attract people back to the sector,” he said.

Construction also added about double the average of monthly jobs it added over the past year, at 39,000 jobs.

Skanda Amarnath, executive director of Employ America, a policy research and advocacy group with a headquarters in Washington D.C., said it’s hard to pinpoint exactly what drove that rise in jobs. The CHIPS and Science Act, the Inflation Reduction Act, and bipartisan infrastructure deal have supported employment in construction. Residential construction has been “reasonably robust,” he said. But these jobs could also be tied to a rise in hiring for construction in the spring months.

What do experts make of Black people’s rising unemployment rate?

The last four months of jobs data has shown an increase in Black people’s unemployment rate, from 5.2% in December to 6.4% in March. Black women’s unemployment rate was 5.6% compared to 4.4% last month and 4.1% a year ago. Black men had an unemployment rate of 6.2% versus 6.1% in February and 5.1% a year ago.

Gould said the uptick in the unemployment rate for Black people is concerning to her, because it has happened for a few months now, but not yet alarming because of the volatility in the data collected.

“I think that it’s something that we need to watch,” she said.

Sojourner agreed that while more data is necessary, it’s important to keep an eye on the unemployment rate for Black Americans, particularly if it’s an indication that Black people are having difficulty finding jobs rather than a sign of more people entering the labor market and looking for work.

He added that the effects of a recession tend to hit Black people before other groups.

“That’s very concerning because often you’ll see, Black Americans are on the leading edge … The recessionary stuff hits them first,” he said.

What does prime age employment tell us? 

The prime age employment-population ratio, which measures the share of the working-age population, or 25- to 54-year-olds, who are employed, is also pretty high this month, at 80.7%. In April 2000, it reached an all-time high of 81.9%.

Amarnath said this is encouraging news.

“Right now we’re operating at levels that are especially high. Ideally, they can continue to move higher through the year, but these are levels that prior to the last 12 months we haven’t seen since I believe, more than 20 years ago …,” he said. “You think of [prime age employment] as being the best way of evaluating how many people are employed, adjusting for the aging of the population, adjusting for changes in participation.”

Are we seeing healthy wage growth? 

Wages have continued to outpace inflation, at an increase of 4.1% over the past year. In March, they rose 12 cents or 0.3%. The wage growth numbers, as well as the number of jobs added, show a steady job market but not one that is threatening the Federal Reserve’s attempts to bring down inflation, Gould said.

“When I look at those wage growth numbers, I think it’s pretty clear that is continuing to normalize very much in line with Fed targets as the inflation rate continues to come down. I think we’re in an economy that is getting where we wanted it to be and, I think, what the Fed is looking for as well. We’re seeing strong job growth, and that’s promising. More people are coming back into the labor force looking for opportunities,” she said.

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High prices at the grocery store and consumers’ memories of their pre-pandemic budgets may be playing a role in how Americans feel about their finances as recession fears recede. (Photo by Justin Sullivan/Getty Images)

Policy, politics and progressive commentary

Americans are still worried about their financial stability even as their recession fears lessen. High prices at the grocery store and consumers’ memories of their pre-pandemic budgets may be playing a role. Here’s what financial and economic experts have to say about what the most recent economic indicators tell us about people’s perception of the economy.

What is driving consumer confidence?

The Consumer Confidence Index, released by the business nonprofit and research organization the Conference Board, is a survey indicating how optimistic or pessimistic consumers feel about their financial well-being and the economy.

The Consumer Confidence Index fell slightly in March from 104.8 to 104.7, well below some economist expectations of 106.5. Although consumers’ perception of the likelihood of a recession fell this month, consumers were less confident about their family’s financial situation in the next six months. The percentage of consumers who expected their incomes to fall rose from 11.9% in February to 13.8% in March.

Elizabeth Pancotti, director of special initiatives for the Roosevelt Institute, said that consumers’ experience of the economy and their financial situation may come down to crises they’re feeling that may not show up at a macro level but may strike their budgets particularly hard.

“When egg prices finally come down and chicken prices finally come down, but orange juice is high because of some random citrus greening disease or some other shocking food item, your total grocery bill doesn’t come down and that really highlights it,” she said.  “There’s one crisis after another at a micro level, which I think is really why we’re not seeing that divergence between overall economic strength and at a very micro level, the feelings of average consumers.”

Pancotti acknowledged that housing is also one of the highest expenses for consumers right now, and those prices aren’t showing as much movement as other areas of consumers’ budgets.

“For most families, it is the largest purchase they make every month,” she said.

Why isn’t consumer sentiment higher?

Consumer sentiment, a smaller survey conducted by the University of Michigan, also gauges people’s sense of the economy overall, the labor market, and how they see inflation. On Thursday, U.S. consumer sentiment jumped to 79.4 from 76.9 in February and 62 a year earlier, making this its highest level since July 2021.

Joanne Hsu, director of the survey, said in the report that this number is an indication that consumers believe the economy is “holding steady.”

“As the election season progresses and debates over economic policy become more salient for consumers, their outlook for the economy could become more volatile in the months ahead,” she added.”

Kevin Kliesen, business economist and research officer at the Federal Reserve Bank of St. Louis, said consumer confidence and consumer sentiment are still far below pre-pandemic levels and that it’s a puzzle as to why when the economy has “been growing fairly strongly” in the past year and a half. But like Pancotti, he added that high prices at the store compared to pre-pandemic prices may be playing a role in those measures.

“If you’re like me, you look at something, and you go, ‘Oh my gosh. I remember when it was so much less before the pandemic.’ So I think that calls into question, probably, a lot of people’s perceptions of the overall state of the economy and importantly their consumer finances,” he said.

What can we expect from inflation and the Fed?

As the Federal Reserve looks to its favorite inflation measure, the personal consumption expenditures price index, economists are watching the PCE closely for signs the Fed will cut rates in the coming months. This policy change is expected to have effects on the housing market as well as the growth of businesses.

The PCE rose 0.3% from January to February and 2.5% over the past year, according to the  Bureau of Economic Analysis’s Friday release. Fed Chairman Jerome Powell responded to the news when he spoke at the San Francisco Fed and said the numbers were “in line with expectations” but not as reassuring as the numbers Fed officials saw last year.

Despite this reception from Powell, some financial experts believe inflation will ease up soon. Cristian Tiu, associate professor of finance at the University at Buffalo, said that although the economy is adding jobs, he doesn’t believe the quality of those jobs is high enough to sustain this price growth for much longer.

“Prices basically on consumer goods can’t be driven up forever just by the very top of the wage distribution. The rest of the wage distribution actually looks pretty modest. So I don’t think these price increases can actually be sustained,” Tiu said.

For this reason, he doesn’t think the Fed should continue to put brakes on the economy through restrictive monetary policy. Tiu added that he sees inflation as driven partly by corporate profit-seeking, with companies taking advantage of inflation to continue to keep prices higher than they can justify for the American consumer.

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A Moody’s Investor Service report released in October showed Nevada among states with the largest decline in affordability, due in part to growth in new residents. (Photo: Ronda Churchill/Nevada Current)

Policy, politics and progressive commentary

Inflation is slowing and job growth has surged, but many Americans still feel the burden of expensive housing – fueled in part by high demand, low inventory and mortgage rates.

Home prices across the U.S. rose 5.5% over the past year in December 2023 and they are projected to increase 2.8% year over year by December 2024, according to CoreLogic, a consumer and business information company. None of the states in CoreLogic’s data showed home price declines.

Rents shot up 23.9% between the beginning of 2020 and the start of of 2023 and home prices rose 37.5% according to Harvard University’s Joint Center for Housing Studies’ 2023 state of the nation’s housing report. The median sales price of a home sold in the U.S. is $417,700, according to the St. Louis Fed.

Given the state of housing affordability in the U.S., here’s what to know about ongoing construction shortages, high interest rates, where housing prices are climbing, and what policymakers could do about it.

How did the housing market get this way?

Much of the current predicament renters and homebuyers face is linked to high housing demand, low housing inventory and the Fed’s cycle of hiking interest rates.

Very low mortgage rates – January 2021 saw the lowest recorded mortgage rate at 2.65% – fueled demand but drove up prices, exacerbated by low housing inventory, Matthew Walsh, economist at Moody’s Analytics explained. The Federal Reserve then raised interest rates in 2022 to combat inflation, which in turn influenced mortgage rates.

Those rates reached near 8% in October, and higher rates put constraints on housing supply, with more homeowners staying put. It’s now 6.77% for a 30-year fixed rate mortgage.

A lack of housing stock, both in for sale and overall inventory, is a key long-run problem for housing affordability, said Robert Dietz, chief economist for the National Association of Home Builders. A lack of accessible rental inventory that provides both single family and multi-family rental housing is a problem, he said.

“We simply don’t have enough developed land to build on, particularly in the places where it’s needed the most, which tends to be highly dense, more regulated markets in the largest metros where there’s a lot of population growth,” he said.

He added that a lack of  construction labor as well as expensive building materials – partly affected by supply chain problems – have exacerbated the problem.

A 2023 Home Builders Institute report found that construction would need to add hundreds of thousands of workers to meet residential construction demand. An HBI survey done in 2021 found that around 90% of home builders for single family homes said there was a shortage of carpenters and that more than 80% of remodelers said there was a shortage in most of the construction trades they needed subcontractors for.

What is the Federal Reserve doing with interest rates?

The Fed is expected to cut rates this year, which should have some impact on housing prices. The Fed may not cut rates until May or later, but economists have forecast multiple rate cuts this year.

Many homebuyers and renters are hoping that a cut in interest rates could provide lower home and rental prices, since a lack of homebuying can drive up rental costs.

But economists say there won’t be meaningful relief anytime soon.

“It should push mortgage rates down into the low 6% range and perhaps in 2025 moving into the high 5s,” Dietz said. “That’s not the 2 to 3% rate that we saw earlier, but it will help price in some demand by lowering the monthly payment on a hypothetical mortgage. It is going to have a disproportionate impact on first-time buyers who tend to be particularly sensitive to changes in rates because they don’t have any home equity as first-time buyers.”

Selma Hepp, chief economist at CoreLogic, said home prices will remain pricy for quite some time, even when mortgage rates come down.

“Because home prices have gone up 40%, no matter how much you adjust mortgage rates —  and we’re not expecting them to come down to 2% any time soon if ever again — you’d really have to get them to 2% to get that affordability back,” she said.

What are home price trends in different parts of the U.S.?

New Jersey, Connecticut and Rhode Island saw the highest home price increases in December, according to CoreLogic’s data, but no states saw home prices go down.

Hepp said that is significant because until this report, a couple states continued to show year-over-year declines: Utah and Idaho as well as the District of Columbia. She said that change may have been fueled by people moving from parts of California and from Seattle who drove up home prices in their new states.

A Moody’s Investor Service report released in October showed Florida, Montana, Nevada, and Idaho had the largest decline in affordability, due in part to growth in new residents.

But no part of the country is being spared by the effects of rising housing prices. Walsh said some of the fastest price appreciation he’s seen is in parts of the northeast and midwest because some of those markets are more affordable compared to parts of the country that saw an influx of residents earlier in the pandemic, such as metro areas in Mountain states including Colorado and Arizona

“The places where we’ve seen the most moderation in home prices have been in the places that lost that affordability edge…,” he said. “… Some of the fastest growing places in the northeast, like upstate New York, a place that really hasn’t seen quick increases in home prices in a long time, have been showing signs of life over the past year.”

How are policymakers helping?

Some states and cities are stepping up to the challenge of improving its affordable housing stock.

A program in Maine is funding more affordable rental housing, which includes the improvement of existing housing. Minnesota’s Family Homeless Prevention and Assistance Program is expanding rental assistance.

Voters in Phoenix and Albuquerque, New Mexico, last year supported bond measures that will spend millions on affordable housing. In 2022, voters approved housing bonds to fund more affordable housing for Buncombe County, North Carolina; Columbus, Ohio, and Kansas City, Missouri. Localities in Colorado and Montana voted to use tax revenues on affordable housing development and projects in 2023 as well.

On the federal level, the Biden administration announced in July it would address low housing supply by incentivizing projects with greater density and creating a program to fund projects that focus on zoning reforms. In October, the administration also introduced new housing initiatives to increase homeownership, such as loans to boost affordable housing on tribal lands and letting homeowners use prospective rental income from “dwelling units” at their home as part of their income when they want to qualify for FHA-insured mortgages. Some economists say that zoning is far too restrictive to increase housing supply and make it more affordable.

Government policies to address housing affordability should include “thinking about ways to incentivize state and local governments to reduce regulatory burdens and enact zoning reform to promote density where the market demands it,” Dietz said.

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Wells Fargo is one of the major banks that would be affected by a new overdraft rule proposed by the Consumer Financial Protection Bureau. (Photo by Justin Sullivan/Getty Images)

Policy, politics and progressive commentary

The cost of overdrawing your bank account could ease considerably under a rule proposed this month by the Consumer Financial Protection Bureau. The proposed regulation is in line with a larger effort that the Biden administration has championed the past few years to crack down on “junk fees,” which are tacked onto everything from ticket prices to hotel bills.

The agency says roughly 23 million households use overdraft fees each year and while most consumers’ overdrafts on debit cards are less than $26, they usually have to pay overdraft fees around $35. Regulators are proposing instead three options for banks: They could offer overdraft loans that comply with lending laws, set a fee that reflects the actual cost or charge a standard fee set by the agency. And while regulators haven’t settled on that benchmark fee yet, amounts being considered range from a low of $3 to a high of $14.

The overdraft rule would apply to insured banks and credit unions with more than $10 billion in assets. The regulation, which has to go through a review and public comment period, would likely take effect in October 2025.

President Joe Biden called on federal agencies to come up with a plan for lowering and disclosing junk fees at a White House Competition Council meeting in September 2022, and in February of 2023, Biden devoted a portion of his State of the Union speech to his agenda on lowering junk fees. He said that although these costs may seem small to some, they are burdensome to many households. In financial services, these fees may include onerous overdraft fees or credit card late fees that the CFPB says are often profit-driven..

Marc Jarsulic, a senior fellow and the chief economist at the Center for American Progress, a progressive think tank, said deceptive and unfair fees are prevalent and that this is backed up by estimates of the cost to consumers when they can’t easily understand prices and compare them to other options.

“There’s a second kind of cost aside from this, the search cost, which is when you can’t figure out easily what the price of something is and what the price of alternatives or substitutes might be. … They can spend limited income on things that they normally wouldn’t if they knew what the relative prices were,” he said.

Although regulators and policymakers have been aware of the problems with junk fees for a decade or more, the prominence of this issue for the Biden administration and the awareness it brings to consumers is unusual, and putting it all into one non-industry specific effort is a substantial change from previous approaches, said Sharon Tennyson, an economist and a professor at Cornell University in the department of policy analysis and management.

“We’re all aware that we’re facing these fees and they’re a big annoyance but to actually get consumers to realize that, hey, this might even be an illegal practice, I think is an important advance of what we’re seeing in the new policy environment,” she said.

Tennyson said it’s fairly rare to see presidents talk about consumer rights.

“It’s highly unusual for presidents in these high level speeches to focus on citizens as consumers at all,” she said.

Credit card regulations, banking fines

The new overdraft regulations follow a rule proposed last year that aims to bring down credit card late fees, which the CFPB estimates cost Americans $12 billion each year. The rule, which could be finalized as soon as this month, could reduce those fees by $9 billion each year, the CFPB says. Under current regulations, a credit card company can charge $30 for a first late payment and $41 for subsequent ones, and up to 100% of the required payment, if it can prove the costs it incurs are higher than $41. But under the CFPB’s proposal, the late fee could never be more than $8 or 25% of the required payment, if the credit card issuer proves that its costs exceed $8.

Banking groups, including the American Bankers Association and Consumer Bankers Association, oppose the rule, claiming that it will make it harder for consumers to obtain credit cards and that consumers will be forced to turn to payday loans, which will end up costing them more money.

The agency also has released guidance for banks on what it calls “surprise depositor fees” and “surprise overdraft fees,” which they said may be illegal under the Consumer Financial Protection Act.

The crackdown on these types of fees has already had an effect on banks’ behavior.

“There have been financial penalties on individual banks that have caused banks to change their behavior and we’ll know more about that as the CFPB continues to monitor reports of abusive treatment of customers,” Jarsulic said.

In July, Bank of America was fined and ordered by the CFPB to stop charging customers repeat non-sufficient fund fees. Wells Fargo paid more than $2 billion to customers and $1.7 billion as a civil penalty in December 2022 for surprise overdraft fees and freezing accounts based on mistaken fraudulent activity. As a result, Wells Fargo has been ordered not to charge overdraft fees to banking customers who had money at the time of their transaction. The agency took a similar enforcement action against Regions Bank in 2022 for its surprise overdraft fees.

Regulating wallet apps

In addition to monitoring banks, regulators say they want to make sure that non-banking companies’ fees and other business activity adheres to the law as well. In November, the CFPB proposed a rule to apply the same banking safeguards it provides to banks — such as deposit insurance — to businesses like Venmo and Apple Pay that provide “digital wallets.” Under the regulations, the agency would be able to monitor these companies to make sure consumers’ rights to privacy and the transfer of money are being protected.

“What they’re saying is there are potentially deceptive practices, and that there is some risk that people are being surveilled by the operators of these apps in ways they might not like and that those data can be misused potentially by big digital firms to manipulate consumers algorithmically or otherwise try to influence their behavior,” Jarsulic said. “That proposal is essentially a beginning step to get the data that’s needed and figure out what’s going on in an area that is itself not transparent.”

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Airport workers and supporters march during a rally at Ronald Reagan Washington National Airport on March 7, 2023 in Arlington, Virginia. The group, organized by the Service Employees International Union, is demanding Metropolitan Washington Airports Authority mandate paid sick leave and employer-paid health care for airport service workers at Washington National and Dulles International Airport. Virginia law does not require employers to provide paid sick leave. (Photo by Kevin Dietsch/Getty Images)

Policy, politics and progressive commentary

When the Minnesota legislature was debating a paid sick leave bill last year, business owners argued that such a law would not allow them to provide as many employee “perks” or be as “adaptive” to employee needs as they say they would be without such a requirement.  But a half dozen witnesses made a case for the need, with many workers sharing examples of the numerous times they had to work while ill.

Maria Vazquez, a member of a worker organizing group in Minneapolis, told lawmakers she frequently felt too sick to work her job as a housekeeper but couldn’t afford to not show up.

“And so there have been many times I have presented to work, not only with a high fever but to the point where my legs could barely support me and people would ask me why are you working and there wasn’t really a choice without the sick and safe time,” Vazquez said.

The earned sick and safe time bill ultimately passed and the law went into effect this month. Another bill providing paid family and medical leave also passed last year but takes effect in January 2026. Minnesota joins 14 other states and the District of Columbia that now require paid sick days. Meanwhile 13 states and DC provide paid family leave and medical leave, which provides for longer time off, according to KFF. (Ed. note: Nevada is among the majority of states with no laws requiring paid sick days or paid family leave.) Washington, which has had a paid sick leave law since 2018, has updated its law to cover accrual of sick time for construction workers, to take into account that these employees may have multiple employers in a short period of time. Those changes took effect Jan. 1. California workers recently won an increase in the number of paid sick days employers must provide, from three days to five days. In July, Chicagoans will be able to get five sick days each year.

The political momentum for paid sick leave is continuing in other states this year and policy experts say that momentum may eventually force the federal government to pass federal legislation as more people recognize the economic value of paid sick leave.

Advocates for paid sick time in Alaska, Nebraska and Missouri are pushing ballot initiatives this year. The group Paid Sick Leave for Nebraskans wants to see full-time workers enjoy a minimum of five to seven days of paid sick time and for other employees to receive some paid sick time as well. Missourians for Healthy Families and Fair Wages has launched a campaign to get paid sick time and an increase in the minimum wage on the ballot this year in their state. The amount of paid sick time for employees would correspond to their hours and employer size.

Policy advocates and economists say a lack of paid sick leave, which tends to impact the most economically unstable workers, forces workers to choose between financial stability and their own wellness as well as the health of their family and coworkers.

The issue is particularly pressing this month as respiratory viruses are surging. According to the Centers for Disease Control’s Jan. 5 update on respiratory virus activity, which includes the flu, RSV, and COVID-19, shows that visits to the emergency department are “elevated in all age groups” and rising, with the exception of school-aged children. Wastewater levels indicating infections are 27% higher. Hospitals are reporting a rise in COVID-19, flu, and RSV cases, including in Michigan, Ohio, Maryland, and New Jersey.

COVID-19 driving discussions

Molly Weston Williamson, senior fellow at the Women’s Initiative at the Center for American Progress, said the COVID-19 pandemic played a part in driving the policy discussion about paid sick time.

“The pandemic placed a new level of attention on the need for paid sick leave, driving home the critical public health stakes as well as the economic and human costs of the status quo — a need only underscored by union action like the rail workers’ fight for paid sick leave,” she said. “That led to increased policy attention, from temporary COVID paid leave at the federal level in 2020 to new and expanded state and local protections.”

To improve these working conditions, some Democrats and labor advocates are advocating for the passage of legislation such as the federal Healthy Families Act, which would provide a national right to earn time off that is job protected and provides a way to calculate the accrual paid sick time, and the FAMILY Act, which provides paid family and medical leave benefits. (The Family Medical Leave Act, or FMLA, which was passed by Congress in 1993 over opposition from the business community, requires employers of a certain size to only offer unpaid family leave.)

A House bipartisan family leave working group has released a framework for legislative options for paid leave, such as public-private partnerships for state-run programs and paid family and medical leave tax credits. A federally funded program for paid leave was not included in those options.

In the past, Republicans on the federal level have disagreed with Democrats over how broadly to provide family and medical leave and how to fund that leave.

Sherry Leiwant, co-president and co-founder of A Better Balance, said that the released framework is a good step toward advancing more worker-friendly policies in Congress.

“Maybe the Republicans are coming around to recognizing that this is really important to people.”

And with more states passing laws on paid sick time, Leiwant said businesses may be realizing that they need more consistency, especially if they operate across state lines.

An economic necessity

The need for paid sick days to help stabilize workers’ finances is clear through the data, according to an Economic Policy Institute report released in November. Compared to 63% of private sector workers having access to paid sick days in 2010, 78% now do and during the same period, the percentage of the lowest wage workers who had paid sick days almost doubled, the think tank found. The report’s authors also calculated what workers would be giving up in housing, groceries, transportation, and other essentials for their unpaid sick days.

“If we think about taking off work without any assets or savings, that could have a very big impact on the family budget,” said Hilary Wething, an economist at the Economic Policy Institute, and one of the report’s authors. “If a worker loses wages for taking off five days for example, if they have RSV or their kid has RSV that could be their entire grocery budget for the month. If they take three days off, it could be the entire monthly budget of utilities and two days could be a monthly budget of gas, which could make it difficult to get to work. You can see how a series of events could cascade for them and become a much bigger problem than it had to be.”

State Republican lawmakers and business groups have often argued that paid family leave and paid sick time is a burden on businesses and may reduce workers’ benefits. But Wething said such arguments against paid sick time are not supported by the available research and that the stability in both the health and finances of workers could also benefit employers.

“If we have a healthier workforce, we have a more productive workforce and we have to remember that every sick worker can reduce businesses’ productivity,” she said. “I think a federal mandate allowing more people the opportunity to earn paid sick leave, essentially by having fewer people show up to work sick, will have an effect on the economy writ large from a public health perspective that’s going to be great for employers’ bottom lines.”

Williamson of the Center for American Progress, said it’s about time that the federal government learned from the effects of the COVID-19 pandemic and passed the Healthy Families Act.

“We know that paid sick leave works — for workers, for businesses, and for the health of our communities,” she said. “And yet, as we approach four years since a deadly pandemic hit our shores, at the federal level, the United States still does not guarantee a single day of paid sick time.”

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The health care industry continues to add jobs, in part because of the U.S.’s aging population. (Photo by Mario Tama/Getty Images)

Policy, politics and progressive commentary

Friday’s jobs data showed a strong, resilient U.S. labor market with wages outpacing inflation — welcome news for Americans hoping to have more purchasing power in 2024.

The December jobs report unveiled another unemployment rate below 4%, as it has for two years, at 3.7%, the same as it was for November. The economy added 216,000 jobs, many of which were concentrated in health care, local government, construction and social assistance, which includes child care, social workers and home care aides, according to the Bureau of Labor Statistics data.

Democrats celebrated the news and took it as an opportunity to voice their frustrations with Republicans as policymakers grapple with another possible government shutdown over U.S.-Mexico border policy and other issues. Congress has deadlines of Jan. 19 for four government spending bills and Feb. 2 for eight government spending bills.

President Joe Biden stated on Friday morning that the jobs data “confirms that 2023 was a great year for American workers.

“The strong job creation continued even as inflation fell to the pre-pandemic level of 2 percent over the last six months …,” he added.

Rep. Bobby Scott (D-VA), ranking member of the House Committee on Education and the Workforce, touted the strong jobs report and stated, “Now is not the time to reverse our progress on the economy. I remain committed to opposing any effort that gambles with the lives of everyday Americans in order to engage in political grandstanding.”

Economists and data analysts provided States Newsroom with their takeaways on key news in the report, from wages to job growth in healthcare.

Wage growth and cooling inflation provide relief

Wages are outpacing inflation, with average hourly earnings increasing by 15 cents and rising by 4.1% over the past year, well over 3.1% inflation. With inflation coming down fairly quickly, wages are solidly above inflation, economists said.

Moody’s Analytics Chief Economist Mark Zandi said wage growth is now firmly above the rate of inflation, which means people’s real purchasing power is improving.

“They got creamed back in 2021 and particularly in 2022 when inflation outpaced wages,” Zandi said. “And I think that’s one reason why people are so uncomfortable with their financial position, but that’s improving now and improving very quickly as wage growth remains strong and firm and inflation is lower and continues to moderate.”

Elise Gould, senior economist at the Economic Policy Institute, added that lower wage workers in particular have seen that increased purchasing power for longer.

“For the last six months, the average hourly earnings for private sector workers has been beating inflation so their purchasing power has increased and on average, over the last few months, we also know from other data that lower wage workers have been seeing stronger wage growth,” she said. “They’ve been beating inflation for a lot longer. Overall, the purchasing power has certainly been increasing as inflation has been coming down faster.”

Health care and government continue to add jobs 

The government workforce grew by 52,000 people with the majority of those jobs — 37,000 — in local governments.  According to the Bureau of Labor Statistics, the average gains of jobs per month in 2023 was more than double the average for job growth in 2022.

Gould said there still seems to be room for government employment to continue to grow.

“We still have a lot of catching up to do there because when we think about government employment, it has not kept up with population growth in any way,” she said. “You would think that the services that are being provided by the government would need to grow even more. So I think there’s a fair amount of room there that we are not back to normal in that sense.”

Health care also continues to see job growth, which Gould expects to continue partly because of the U.S.’s aging population. Health care jobs rose by 38,000 in December. Ambulatory health care services and hospitals added 19,000 jobs and 15,000 jobs, respectively.

Zandi sees these sectors as mostly playing catchup after the private sector crowded out some of these jobs during the recovery by offering higher pay.

“Private businesses were willing to pay up big wage increases to hold on to workers and hire new ones,” he said. “And that was impossible for local governments or for hospitals to keep up with. But now that the private sector is fully recovered, we’re now starting to see these other sectors be able to hire again, find workers and bring them on the payrolls.”

Economists watch for signs of a slowdown

Economists had mixed responses to the changes in the labor force participation rate and employment-population ratio, which both fell 0.3% percentage point in December. The labor force participation rate sheds light on the economy through the percentage of working age people in the labor force, which includes both those actively seeking work and people who are currently employed. The employment-population ratio shows the number of people employed as part of the working age population.

Gould said she’s watching this data closely to see whether these changes are a source for concern but she says it’s important to keep in mind that unemployment is still very low.

“Is that just volatility in the series or is there something to watch for?” she said. “…It’s not indicative of some huge problem but it’s something we want to keep watching. I didn’t like the drop in employment, particularly prime-age employment and participation is soft.”

Zandi said it’s hard to read too much into any month-to-month change in this data yet but that the labor market is slowing down a bit.

“I think the general pattern in the data shows that the job market is resilient, continues to create lots of jobs, and unemployment remains low. But it is throttling back. Job growth is definitively slowing and other measures of the strength of the labor market are, are moderating. You’re seeing fewer hours of work and temp employment is declining,” he said.

On the labor force participation rate, Zandi said he suspects that participation is not going to continue to rise.

“Boomers are retiring en masse and that’s going to wash out any increase in participation by other groups. Broadly speaking, I think the report is consistent with an economy that remains strong but is slow and consistent with getting inflation back to something we all feel comfortable with,” he said.

Trends in state pay

Data released by ADP, a payroll processing firm, on Thursday, confirmed Zandi’s view on a cooling labor market as pay increases for people staying at their jobs were down in December from November. ADP’s median year-over-year pay change was higher in states such as Montana, where pay shot up 8.2% and Idaho, where pay rose 7.5%. New Mexico and Arizona also had higher increases in pay compared to many other states at 6.7% and 6.2%. Washington, Oregon, Wyoming, North Dakota, and South Dakota also had pay growth over that time period.

Liv Wang, lead data scientist at the ADP Research Institute, told States Newsroom that ADP saw higher pay growth for lower-paid workers during the recovery.

Wang added in an email, “….some of the states with higher percentage increases in pay have lower median pay levels. This is true for some states in both the Northwest and Southwest. This same trend also applies to the Leisure and Hospitality industry, which has been leading pay increases. However more broadly, pay gains have slowed down recently and the pay premium for changing jobs has been falling.”

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Economists don’t expect consumers to change their spending habits enough to hurt the economy in 2024. (Photo by Justin Sullivan/Getty Images)

Policy, politics and progressive commentary

Next year is packed with potential shifts in the economy but many economists and investment analysts expect that the country will likely avoid a recession in 2024 even as growth slows in the first half of the year.

States Newsroom talked to economists about their expectations for some key metrics as well as their concerns about what could change their outlook.

The job market will remain strong but not as hot as 2023

The unemployment rate has remained below 4% for nearly two years, with the unemployment rate falling to 3.7% in November. But hiring has cooled off from the start of the year and retail employment dropped by nearly 40,000 jobs in the most recent jobs report, which leaves the question: How stable will the labor market be in 2024?

Mike Konczal, director of macroeconomic analysis at the Roosevelt Institute, a New York-based think tank, said that although there has been a slowdown in the hiring rate, there have not been many layoffs, which bodes well for next year if the Federal Reserve does not “overshoot” in its efforts to slow the economy. The Fed has paused its campaign of raising interest rates, which it began in March 2022, and economists expect the central bank will hold rates steady when it meets Dec. 12-13.

“Imagine the unemployed as a pool of water. Instead of more unemployed people going in, it’s just draining a little less. That’s a different kind of dynamic,” he said. “We normally are used to, in a slow labor market, hires essentially just stop and layoffs increase. Some people pointed out that a lot of the change in employment has happened among younger people. It’s not been a broad-based slowdown in 25 to 54 year-olds.”

Mark Zandi, chief economist of Moody’s Analytics, said he thinks the labor market for 2024 will remain stable and that job growth will be resilient but slow.

“I think 2024 should be an OK year for workers — still plenty of jobs and low unemployment and while wage growth will moderate, it should remain strong enough to outpace inflation,” he said.

According to the Bureau of Labor Statistics in November wages rose 4% over the past year, compared to inflation which has been easing with November’s report showing overall prices rising 3.1% over 12 months, and down from 3.2% in October.

Jesse Rothstein, professor of public policy and economics at the University of California Berkeley, said the strength of the labor market partly depends on how successful the Fed’s interest rate policies are.

“If inflation is coming down and unemployment isn’t going up, and they can continue this tight roadblock, I think we’ll see the economy cooling off a bit and wages continuing to increase, to catch up to the inflation that we saw over the last couple of years, but not dramatically outpace that,” Rothstein said. “ … If they’re not successful, the risk is that they overtighten and tip us over into a recession, but thus far there’s no sign that that’s what’s going on.”

Workers will have the power to keep organizing 

Workers in retail, auto-manufacturing, media, and shipping have made news through their labor organizing this year, particularly during what was dubbed the “hot labor summer,” when thousands of workers went on strike or heated up contract negotiations with threats to strike. The tight labor market and greater profits in some industries gave workers the power to demand better working conditions, higher wages, and contracts that were more inclusive of lower-paid workers, and that’s not expected to change in the coming year.

For workers to lose significant leverage in their fights for safer workplaces and higher wages the unemployment rate would have to rise significantly, Konczal said. Organizers will also still enjoy the advantage of a very pro-union National Labor Relations Board, he said.

“When I think more about the background conditions for which workers can exercise some power, I think the issue is less like 3.9% versus 3.6% unemployment, but whether or not the unemployment rate is in the threes or in the fives or sixes or sevens,” he said. “The labor market as a whole is still going to be a strong input to the resurgent labor campaigns.”

He does have some concerns about whether the service sector is going to face headwinds in its workers’ efforts to organize unions as employment starts to slow for these jobs.

“Then again, if demand remains robust and workers do have an edge, I think they will still have the opportunity to push further,” he added.

The housing market will continue to be a challenge 

Federal Reserve policy changes and pent-up demand for homes will result in an even more competitive housing market in many states, and continuing challenges for people seeking affordable homes and rentals. However, some U.S. housing markets, particularly in the Sun Belt, will see housing prices stabilize. Prices will increase, but less quickly than in the past, as they come down from the unsustainable growth they experienced earlier in the pandemic.

Selma Hepp, chief economist for CoreLogic, said, “This year when mortgage rates were slightly below 6%, we had quite a bit of surge in demand, so that’s telling me there’s quite a bit of pent-up demand out there but people are sitting on the sidelines and waiting out for mortgage rates to fall.”

She said baby boomers and first-time homebuyers are the biggest competitors in the housing market right now. With mortgage rates coming down slightly, first-time homebuyers have a higher share of the recent mortgage application growth, she said. Those buyers leaving the rental market will, in turn, affect rental prices.

Hepp said that while rents will continue to rise in 2024, they won’t shoot up as they have in the past few years and will begin to moderate in price.

“Historically, rents are up on a 3% year over year basis and I think what’s what we’re going to revert back to, the reason being because folks who are priced out of the market for purchase are going to bring in renters or remaining renters because they’re not ready to buy or there isn’t inventory out there,” she said.

Zandi said that he doesn’t think the housing market will become affordable for many of the Americans currently priced out in the next year.

“I think we need to see some modest price declines but that’s going to take some time because all those people who have 3.5% mortgages are going to be very reluctant to move. They’re only going to move when they have to divorce, death, children, or a job change and that could take some time,” he said. “It’s not that I think the worst is at hand in terms of home sales and affordability, but I don’t see the market becoming affordable to most Americans any time soon, certainly not in 2024.”

The Midwest will also continue to see some increased housing demand because of the federal government’s investment in semiconductor manufacturing, Hepp said.

Consumer spending will ‘push the economy forward’

Konczal and Zandi said they aren’t concerned that there will be enough of a significant change in consumer spending to hurt the economy in 2024, and that so far, they are encouraged by what they see. Core prices, which excludes food prices and energy, rose 0.3% in November, up slightly from 0.2% in October, keeping the increase for the year at 4%. But neither Konczal or Zandi see this as cause for alarm.

“In aggregate, there’s still a lot of strong savings and strong spending,” Konczal said. “Obviously for many people, too many people, [savings] and other things are a real concern. But when we’re looking at the economy as a whole, it does seem like the spending is remaining quite strong and financial conditions haven’t deteriorated either. … I think there’s every reason to assume that it will continue, especially if the Fed is willing to take yes for an answer with the fact that they brought down inflation.”

Despite higher housing prices, the financial health of many Americans has improved, Zandi said.

“People are still a lot wealthier than they were before the pandemic hit and in the high-income households, low-income households, folks in the top two-thirds of the distribution of income, still have a lot of extra savings they built up during the pandemic that they appear willing to use when they need to to maintain their purchasing power,” he said. “I think that the consumers are not going to spend with abandon and that’s good because that would be the fodder for inflation and more rate hikes. But I think (they’ll) just do their part and continue to push the economy forward.”

What could go wrong?

Economists said that there is potential for economic gloom, depending on the political outcomes next year. Although the general election is about a year away and the numbers could change significantly between then and now, some polls have shown President Joe Biden and former President Donald Trump running neck-and-neck. The political and social upheaval that close results could bring, could also spell economic turmoil in 2024.

“It feels like it’s going to be very close and therefore the potential for it being contested is very high and there’s no upside to that,” Zandi said. “It’s just a matter of how much downside there will be, how much social unrest and violence there will be. Hopefully we have none … But that’s certainly something to watch for sure. It is a risk to my optimism about the economy in 2024.”

He said that some of these worst-case scenarios could impact the stock and bond markets.

“A close and contested election could result in social unrest that would manifest most quickly and significantly in the stock and bond markets. Given how fragile consumer and business confidence already is, this could upend it, causing consumer spending and business investment to falter, and a recession ensue,” he said.

Rothstein, the Berkeley professor, said a repeat of a candidate refusing to accept their loss, as Trump and his supporters did in 2020, could be a major issue for the country, and although the economy isn’t his first concern when assessing the potential damage, it could pose a “big problem” for financial markets.

In addition to worries about the economic impact of the presidential election, economists are keeping their eye on the risk of a government shutdown. Although it was averted this year with approval of a stopgap spending bill, Congress is staring down deadlines in January and February to work together on spending bills to avoid a shutdown.

“I think a government shutdown is always a threat to the economy,” Rothstein said. “If it’s shut down for more than a couple of days, you end up with huge impacts that ripple through the economy and it may cause a recession. Even if it doesn’t cause a recession, it definitely makes our economy more fragile and poorer. So I think we have to hope that the signs that we’ve avoided a shutdown so far will continue.”

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Retailers, worried that shoppers are cutting back their holiday spending this year, are hiring fewer seasonal workers. (Photo by Michael Ciaglo/Getty Images)

Policy, politics and progressive commentary

Black Friday shoppers may notice longer lines and fewer retail associates in some of their favorite stores than in past holiday seasons as retailers scale back seasonal hiring over concerns about consumer spending.

JCPenney is hiring 12,000 fewer workers than last year. Macy’s 3,000 fewer. Meanwhile a Walmart executive said the retail giant has been hiring “throughout the year” and plans to serve customers with the workers it has. And Challenger, Gray, and Christmas, which tracks employment trends, reported that so far, this year has had the fewest announcements of large-scale seasonal hiring plans since 2013.

“Hiring is a really good indication of retailers’ sentiment of the expectation of holiday (sales) and when they’re kind of ho-hum about increasing the numbers, that really does demonstrate their number one concern for less than gangbuster sales,” said Marshal Cohen, chief industry analyst at the NPD Group, a market research company.

The careful approach to hiring reflects the mixed messages in the economy. The labor market has remained resilient with an unemployment rate below 4% for the 21st straight month, inflation has fallen and wages have risen. Since 2021, inflation-adjusted consumer spending on retail goods has remained fairly high. But the personal savings rate has fallen since May and credit card delinquency rates are up.

Economists, as well as retailers, have signaled that they are worried about the effects of the return of student loan payments on the health of the economy, since consumer spending represents so much of the U.S.’s economic activity. The Fed’s long campaign to raise interest rates, although paused at the moment, has also affected consumers.

Adrian Mitchell, chief operating officer and chief financial officer at Macy’s Inc., said in the second quarter earnings call in August that Macy’s is thinking about “consumers’ ability to pay debt using their disposable income.”

“This is about credit card balances, this is about student loans, which we know is going to come into focus in the next month or two, auto loans, mortgages,” he said. “So we just believe the customer is coming under pressure because of these new realities that they have to continue to deal with as we get through the back half of this year and move into next year.”

Cohen said retailers are basically trying to protect their margins. “The retailer this year is basically saying we’re going to do what we have to do to get the volume, but we’re also going to protect the margin and what that means is hire and have less than what we need, but we are better off than having more than what we need,” he said. “And that’s the same for merchandise … Instead of chasing one sale by buying more merchandise, I’m better off as a retailer, saying, ‘OK, I’ve sold out. Maybe you should buy something else and this way I don’t have to discount it all that much.’ ”

Sales growth slow but steady

More customers — 79% compared to 74% last year — said that they will either look for cheaper alternatives this holiday shopping season or not make the purchases at all, according to a Nov. 6 McKinsey report. A smaller percentage of customers said they were willing to “splurge” on gifts this year and fewer people plan to shop at traditional stores.

Still, holiday sales are expected to grow, just less than the past three years. The National Retail Federation estimates that retail sales during November and December will increase 3 to 4%, down from a 5.4% increase last year. But what people are buying may be different. “Service spending growth is strong and is growing faster than goods spending,” said the NRF’s Chief Economist Jack Kleinhenz.

The NRF also pointed out that online sales are expected to increase between 7% and 9%, an increase reflected in Amazon’s plans to fill 250,000 positions, 100,000 more than the past two years. UPS plans to hire 100,000 people, as it did in 2022. FedEx would not disclose a specific number.

Retail recovery

Overall, the retail industry appears to be healthy with employment having remained steady since January though softer than last year. Elise Gould, senior economist at the Economic Policy Institute, said, “We have recovered more than the number of jobs that were lost in the pandemic when millions of people lost their jobs.”

Gould said one explanation for the hiring this year may be that employers, particularly in retail, are more likely to keep staff on in this tighter labor market because it has been harder to attract and retain employees.

“It’s possible that employers over the last few months and over the last year are holding on to workers because they don’t want to have that business of trying to find workers when they need them. And so it’s possible that you’re not seeing that same pickup because they’re already staffed up to some extent in some of those jobs,” she said. “… It’s too early to tell really.”

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Activists protest outside of The White House to “Cancel Student Debt” on March 15, 2022 in Washington, DC. The Supreme Court’s decision that the Biden administration didn’t have the authority to cancel student debt helped sow confusion that scammers are using to their advantage. (Photo by Paul Morigi/Getty Images for We The 45 Million)

Policy, politics and progressive commentary

Complaints about student debt relief scams are increasing as the date approaches for borrowers to restart payment on their student loans after more than a three-year pause.

Consumer protection advocates say that the Biden administration’s student debt relief efforts, the subsequent halting of those policies by the courts, and the restart of student loan payments have bred confusion that allow companies to take advantage of borrowers.

“There is sort of this perfect storm out there that I think is allowing these fraudsters to prey on people,” said Dan Zibel, vice president, chief counsel, and co-founder of Student Defense, a nonprofit focused on student rights.

Zibel said that there has been a lot of policy and legal news on student debt relief for borrowers to absorb in a couple years.

“There is news about repayment plans, news about cancellation, different types of cancellation, whether it’s public service loan forgiveness or fraud-based cancellation, the COVID pause, and then the courts get involved. Debt forgiveness is happening. Debt forgiveness is not happening. There’s new debt forgiveness,” he said. “ …I think that sows confusion for a lot of people.”

And with 44 million owing more than $1.7 trillion — the third highest consumer debt in the U.S. — the appetite for relief is great and makes many easy prey for scammers.

Many of the debt relief scams often start with a telemarketing call where borrowers are promised debt relief if they pay a regular fee. The callers ask for sensitive personal information, and mislead borrowers about being affiliated with the U.S. Department of Education and student loan servicers. Some mention “Biden Loan Forgiveness.”

The number of complaints coming to the FTC about student debt relief scams has steadily risen in the past few months as the restart of student loan payments approaches, from 385 in June to 562 in July and 610 in August. And the FTC and Department of Justice  have been cracking down on the scammers. In August, the agencies returned $9 million to people who paid up to $800 in upfront fees to Ameritech Financial, to take part in what they thought was a federal loan assistance program. The scam also led borrowers to believe that their membership fees would help pay their student loan balance. Arete Financial Group, which said it was affiliated with the Department of Education, had a similar scam that convinced people to make upfront payments. The FTC sent $3.3 million to those consumers in June.

The FTC also has started working with law enforcement agencies and attorneys general to stop illegal telemarketing calls. Some telemarketing campaigns have included scammers pretending to be the government or businesses, luring unsuspecting student loan borrowers.

How we got here

The Biden administration has undertaken a number of policy efforts in the past few years to reduce the burden of student loan debt, including a program announced in August 2022 that borrowers who qualified could have up to $20,000 of federal student loans canceled. Twenty-six million people applied or sent enough information to the U.S. Department of Education applying for the relief. However, the U.S. Supreme Court ruled against the plan in June of this year, finding that the administration did not have the authority to cancel the debt. Since then, the administration returned with the SAVE Plan, a new income-driven repayment plan that allows some lower-income borrowers to pay nothing each month and lets some receive early student loan cancellation, among other benefits. Students who have been defrauded by for-profit colleges are also continuing to receive student loan cancellation.

Zibel said that student debt relief scams tend to target borrowers who are the most vulnerable, whether they’re struggling economically or have language barriers that could make people less able to identify fraud.

But anyone could potentially be tricked by these schemes, said Kyra Taylor, staff attorney at the National Consumer Law Center. She said scammers are getting more sophisticated.

“I’ve heard reports from borrowers that scammers spoofed their student loan servicers email. And the only way you could tell that it was a spoof was by rolling your mouse over the links,” she said. “The scammers are so sophisticated and because the student loan system is so complicated, anyone could be vulnerable, especially if you’re getting an email that looks like it’s from your [student loan] servicer on its face. I think it’s getting harder and harder to tell.”

How to spot a scam

Taylor offers some advice to borrowers who may find themselves wondering whether they’re being scammed. For example, she tells borrowers not to provide sensitive information such as a Social Security number to someone they believe is a student loan servicer.

“We’re getting closer to restarting payment and people are expecting that their servicer is going to reach out to them. The servicer could be calling you but if they’re asking for personally identifiable information, I would hang up and call them back just to make sure that you’re talking to the right person,” she said. “The other piece is that it’s very unusual for the Department of Education to call folks. Any time you’re getting a call from someone saying they’re from the Department of Education, I think folks should be more skeptical.”

Mark Kantrowitz, an expert on financial aid and author of “How to Appeal for More College Financial Aid” told States Newsroom in an email that it’s a bad idea to share your financial student aid ID, which is your username and password, with a third party, because they can make changes you may not be aware of and will end up being responsible for. When borrowers log in, the federal student aid website makes it clear that the use of this information by a third party “for purposes of commercial advantage or private financial gain” is prohibited and subject to criminal prosecution, he added.

Taylor and Zibel said there are things the government can do to reduce the damage done by student debt relief scams. Taylor said that if the government automated relief to borrowers, scammers would have fewer opportunities to insert themselves into the process. Zibel said that the government should continue to educate people as return to payment begins on where to find legitimate sources of information on their student loans.

The FTC also offers advice on how to spot scams. The agency says it’s a red flag if someone tries to charge you for debt relief services before they have done anything for you as a borrower. Ari Lazarus, a consumer education specialist at the FTC, explained in an August blog, “ …Nobody but a scammer will ever offer you quick loan forgiveness.” Experts on these scams also remind borrowers that no one has to pay for help with student loan relief and advise borrowers to look at the federal student loan website.

Janet Yuen learned too late that she did not have to pay for help. In 2019, after receiving a phone call from A Better Solution Student Loans, or ABS Student Loans, she agreed to pay the company $33 a month to lower her debt.

Yuen, a social worker in Southern California, told States Newsroom that she quit making payments on her student loans because she thought ABS Student Loans was doing so on her behalf. Yuen said she paid $33 a month from October 2019 to November 2021 to ABS Student Loans and provided the company with the username and password to her student loan website.

She has about $263,600 in student loan debt and is out almost $900 —  the money she paid ABS Student Loans that she said would have otherwise been spent on financial needs such as paying medical bills.

Yuen said she has contacted the FTC but the agency could not tell States Newsroom whether it is investigating the company because it does not make investigations public.

There is at least one government investigation into ABS Student Loans through Minnesota Attorney General Keith Ellison’s office. On Sept. 6, Ellison announced that 52 student debt relief companies are suspected of violating state law by not registering before offering debt settlement services and possibly misrepresenting fees and services, including ABS Student Loans. Deputy chief of staff for the attorney general, John Stiles, told States Newsroom that the office has asked ABS Student Loans how many customers it has in the state but the company has not yet responded.

ABS Student Loans’s website includes information that it is not affiliated with a government agency and that borrowers do not have to use a third party to apply for student debt relief under a link to its privacy policy at the bottom of its website. The California-based company did not respond to States Newsroom’s multiple requests for information.

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Shona Lamond, executive director of the Downtown Children’s Center in St. Louis, Missouri, says she applied for every grant she could find to keep her center open and teachers paid during the pandemic. (Photo by Rebecca Rivas/Missouri Independent)

Policy, politics and progressive commentary

A huge chunk of pandemic relief funding that kept child care programs afloat for the past few years is set to run out Saturday, and policy advocates say the economic impact will be profound, with the ripple effect hurting labor force participation and consumer spending at a time when the country is still trying to avoid a recession.

Parents struggled to pay for child care and child care centers strained to retain workers well before 2020, but the pandemic accelerated many of the industry’s struggles and without the federal money many would have shut their doors.

Now some of that money is going away. American Rescue Plan Act stabilization funds — $24 billion distributed by states that allowed child care to continue for 9.6 million children — will run out Sept. 30. According to The Century Foundation’s analysis of the impact of the loss of these funds, Arkansas, Montana, Utah, Virginia, Washington, West Virginia, and the District of Columbia can expect the supply of child care programs to be cut by half or more as a result. The end of this funding will cost states $10.6 billion in economic activity according to the TCF report because of the loss in tax and business revenue that results from reduced productivity and staff turnover.

In Nevada, the analysis estimates nearly 11,000 children are set to lose care, parents forced to cut hours at their jobs will lose $30 million in earnings, and more than 750 child care workers will lose their jobs.

States will have to liquidate another $13.5 billion — provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and Coronavirus Response and Relief Supplemental Appropriations Act that funded child care and development block grants — by the same date. Meanwhile, $15 billion in increased funding for the Child Care Development Block Grant expires in September 2024.

The House passed a legislative package in 2021 which would have expanded the Child Care Development Block Grant to apply to far more families, ensuring they had universal pre-K and reliable child care, as Congress approved relief funds to deal with the immediate problems of families and child care providers. But $400 billion to address longer-term problems in child care did not make it through the Senate.

“We have this temporary funding in this context where we thought when we were at the end of the temporary funding, we’d actually have a system we’d be building. We still need that system. Just because it didn’t happen doesn’t mean it’s not necessary. It just means that politics got in the way,” said Julie Kashen, senior fellow and director for women’s economic justice at The Century Foundation.

Karen Schulman, director of state child care policy at the National Women’s Law Center, said the relief funds that will expire in 2024 also served many purposes to keep child care centers afloat. The American Rescue Plan Act Child Care and Development Block Grant supplemental funds were used for many different purposes.

“They also use a portion of those funds to improve quality, which can be a range of activities, whether professional development or wage supplements for child care providers or training or licensing and health and safety — just a variety of initiatives to help providers,” she said. “That money supplemented the existing child care and development block grant program, which is very important for families, but has always been vastly underfunded.”

Demand for child care, competition for workers

Shona Lamond, executive director of the Downtown Children’s Center in St. Louis, Missouri, said she took advantage of every grant she could find to keep her center open. “The federal [Paycheck Protection Program], the American Rescue Plan Act [funds] … Anything that we qualified for, I applied for, and for the most part we received the grants that I applied for to help us,” she said.

Lamond said the nonprofit has used most of the ARPA money on the center’s biggest expense — teachers’ salaries. It has increased salaries in the past few years to try to keep up with inflation and stay competitive, which has involved an 8% increase over the past three years.

“I think it’s really tough to compete with these other places, these major corporations that have that ability to start paying $17 or $18 an hour …” Lamond said. “I don’t fault people for people who get out of education. We do a really difficult job … It’s stressful. It comes with a lot of responsibility and if you don’t do it right, you could lose your license and your livelihood and they’re getting paid rock bottom wages.”

Lamond said the center is still short-staffed and that two classrooms have been closed for more than a year.

“We’ve been low enrollment pretty much since COVID hit. We’ve never returned to our regular capacity,” she said.

Charles Gascon, senior economist at Federal Reserve Bank of St. Louis, said that because workers at child care centers were also more exposed to COVID-19 and it took time for child care centers to figure out how to adhere to different social distancing requirements and maintain capacity, a lot of workers left.

“The policy standpoint played a role but then the fact that these were not very desirable jobs to have in the middle of a pandemic and the wages really didn’t compensate workers for the added risk they were taking on,” he said.

Gascon said a lot of today’s challenges in child care were the same issues it had in 2019.

“In some cases, it may be a little more exacerbated as older people left the workforce so there are shortages in the sector just like other sectors. The labor market has recovered really quickly so the demand for care is there,” he said. “… Now we can add to that a couple compounding factors: one, the population demographic that is having kids now is larger than the demographic from about 10 years ago, so that means there is likely going to be more people that are demanding these kinds of services. We’ve also seen a shift in where the jobs are at so we see women’s labor force participation rates are higher.”

The lack of affordable child care options is pushing more families to consider informal child care that doesn’t necessarily have an educational component, Lamond said. Other than families reaching out to grandparents and the nextdoor neighbor as well as watching kids as they work remotely, she said she’s seeing people connect through local Facebook groups to find parents who come with good references to watch their kids.

“As long as your kid is safe and being really well cared for and loved, sometimes that’s the best you might be able to do so that you can get to work,” Lamond said.

She said she regularly works with families who have to make hard decisions about whether they take a new job or stay home because they struggle to afford child care.

Katherine Gallagher Robbins, senior fellow at the Partnership for Women and Families, said that the end of the funding is bad news for women’s labor force participation, consumer spending, and for the economy in general. Women ages 25 to 54 have played the biggest role in boosting overall labor force participation in the economic recovery, according to Brookings’ August analysis. But Gallagher Robbins said that it’s still much lower than countries with better caretaking support.

“… It’s very clear that women’s labor force participation will take a hit,” she said.

And, in turn, consumer spending will be affected, she said.

“As the supply of child care decreases, you’ll very likely see an increase in cost that will be borne by families,” Gallagher Robbins said. “This will lead to less disposable income to spend on other essential items. And for some families the balance will tip and a parent may have to leave the labor force altogether which will decrease income in both the short- and long-term. I suspect these effects will be largest for Black and Latinx families with low-incomes for whom child care is already the least affordable.”

She also argues that by expanding the labor supply by offering policies that are more supportive of caregiving, the government could reduce inflation without trying to cool the labor market.

Advocates in Congress, state leaders push for better funding

Legislation introduced in the U.S. Senate this year to address these issues did not pass, but some senators have continued to call for more funding of child care. U.S. Sens. Bernie Sanders (I-VT) and Patty Murray (D-WA) released a report in May to draw attention to the child care funding cliff. Murray reintroduced comprehensive child care legislation in April.

Sen. Tina Smith, (D-MN) and co-sponsor of the Expanding Childcare in Rural America Act of 2023, told States Newsroom this summer, “The whole business model for childcare in this country is not working — not for families, not for businesses, and not for providers themselves. Addressing our country’s looming childcare cliff will require significant, federal investments in childcare so that our kids, their parents, and our economy can reach their full potential.”

The Biden administration has also taken steps this year to improve access to child care and stabilize the industry. A Health and Human Services Department proposed rule, announced on July 11, would cap co-payments for child care to 7% of a family’s income, encourage states to take online applications for families trying to access the Child Care Development Block Grant, and pay child care providers participating in those block grants in a timely manner to stabilize child care operations. The rule would also make it clear to states that they should consider siblings of children who already receive subsidies to be eligible for the Child Care Development Block Grant.

On July 19, White House officials met with more than 90 state legislative leaders and child care advocates to discuss how to address the funding needs, according to the White House.

Kashen said New Mexico and Maine are some of the states taking the most advantage of these funds but states need federal help. Maine has provided 7,000 child care workers with $200 stipends but is using state funding to make the stipends permanent. New Mexico allocated $77 million for a program to fund raises for about 16,000 child care workers.

“There are states that are really taking leadership here,” Kashen said. “That said, when you talk to advocates in those states, they will tell you it’s not enough money … This is an emergency and Congress needs to do something and put money in quickly because I think we’re going to keep losing the workforce.”

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