People socially distance as they protest in support of laid-off hotel workers without health care amid the COVID-19 pandemic, in Los Angeles, California, July 23, 2020, photo by Lucy Nicholson/Reuters

commentary

(The RAND Blog)

L.A. Has the Nation's Highest Unemployment. For Some Groups, It's Even Worse Than That.

People socially distance as they protest in support of laid-off hotel workers without health care amid the COVID-19 pandemic, in Los Angeles, California, July 23, 2020

Photo by Lucy Nicholson/Reuters

by Jason M. Ward

August 6, 2020

The Los Angeles combined statistical area (LA CSA) (PDF)—comprising Los Angeles, Orange, Riverside, San Bernardino, and Ventura counties—is among the areas hardest hit by the COVID-19 recession. The Los Angeles–Long Beach–Anaheim metro area had the nation's highest unemployment rate (18.1%) in June. Neighboring Riverside, San Bernardino, Ontario metro area had the 8th highest (14.3%).

These shockingly high average unemployment rates only tell part of the story, however. For the poor and some racial and ethnic groups, the jobs picture is far worse.

The Los Angeles region has among the worst income inequality in the nation, and that divide is mirrored in the pandemic's effect on employment. Before the pandemic-related shutdowns, the average unemployment rate was 6.6% for lower-income families and 2.1% for higher income families. Although this is a substantial difference, both levels were fairly low.

Since the pandemic hit, however, the rates for both groups increased almost fivefold, profoundly magnifying that gap. From April through June, the unemployment rate for workers in households earning above $100,000 was only 11%. For those in lower-income families, it has hovered around 28%.

Figure 1: Unemployment Rates for the LA CSA by Family Income Level

Line graph showing unemployment rates for Los Angeles conbined statistical area by family income level
Month Family income less than $40,000 Family income greater than $100,000
Sep 2019 5.3 2.4
Oct 2019 7.4 2.2
Nov 2019 6.0 2.1
Dec 2019 7.9 1.8
Jan 2020 6.2 1.8
Feb 2020 9.1 3.0
Mar 2020 8.9 3.9
Apr 2020 29.9 11.2
May 2020 27.7 10.9
Jun 2020 26.8 10.6

Source: Author calculations using Current Population Survey Basic Monthly data from IPUMS. Household income is measured over the 12 months prior to being surveyed (using the “faminc” variable in the IPUMS CPS data), thus the measure primarily reflects pre-pandemic income levels.

The Los Angeles area's tremendously diverse population, combined with high levels of occupational segregation (PDF) by race and ethnicity, has also produced significantly different pandemic-related employment patterns.

The Los Angeles region has among the worst income inequality in the nation, and that divide is mirrored in the pandemic's effect on employment.

Share on Twitter

During April and May, Black residents had a lower unemployment rate than white, Hispanic, or Asian residents. But by June, some of that pattern had reversed: The unemployment rate for Black residents was 3.5 percentage points higher than that of Hispanic ones.

Unemployment for L.A.-area Asian residents increased rapidly as the pandemic took hold and it has remained high. One reason is many Asian workers in the region work in service industries. Current Population Survey data show that personal and home care aides, waiters and waitresses, miscellaneous personal appearance workers, and cashiers are among the top 10 occupations for this group.

Figure 2: Unemployment Rates for the LA CSA by Race/Ethnicity

Line graph showing unemployment rates for Los Angeles conbined statistical area by race/ethnicity
Month Asian Black Hispanic White
September 2019 3.77 2.54 2.72 4.37
October 2019 4.09 5.26 3.36 3.48
November 2019 3.08 2.09 4.18 3.30
December 2019 2.69 3.77 4.19 2.73
January 2020 3.57 1.99 4.53 2.68
February 2020 3.12 6.15 4.82 3.55
March 2020 5.97 5.76 5.47 4.39
April 2020 18.80 11.72 19.96 14.87
May 2020 15.30 11.89 18.26 16.29
June 2020 18.76 18.21 14.79 13.58

Source: Author calculations using Current Population Survey Basic Monthly data from IPUMS.

Bad as they are, these figures might significantly understate the true scale of L.A.-area unemployment. Informal jobs—like many in the garment industry, agriculture, and construction—represent an estimated 15% of total employment (PDF) in Los Angeles County. But changes to these jobs, which aren't taxed or registered in government data, aren't accurately tracked or measured.

Informal workers are often non-citizens, so looking at joblessness among that group gives us a picture of how badly damaged this informal sector is. From April through June, the region's 2.5 million non-citizens had an average unemployment rate near 20.5% compared with 16% for U.S. citizens. (Notably, immigrants without legal status, who disproportionately hold informal jobs, are ineligible for traditional unemployment insurance, explaining why the state's program to provide $500–$1,000 in disaster relief for up to 150,000 was quickly overwhelmed with applications.)

For low-income workers who are getting unemployment payments, the expiration of the federal $600 per week add-on is likely to be a profound loss. A proposal in the Senate would drop this supplement to $200 per week, which proponents say will encourage people to return to work.

At first glance, regional employers in construction and hospitality, which rebounded most strongly in June, might welcome an influx of workers seeking jobs. But a June–July spike in COVID-19 infections in Southern California led to renewed business closures, so those job gains may have evaporated. At the same time, the $600 benefit directly contributed to economic demand. Cutting it could also harm job growth.

Some California lawmakers have floated the idea of borrowing from a federal trust fund to extend the $600 payments in the state. But progress has been delayed by uncertainty about what aid, if any, might emerge from Congress or the White House. The only near-term certainty appears to be that effectively containing the spread of COVID-19, which is essential for economic recovery to take hold, remains out of our grasp.


Jason Ward is an associate economist at the nonprofit, nonpartisan RAND Corporation who studies labor market participation, education, health, and links between them.

Commentary gives RAND researchers a platform to convey insights based on their professional expertise and often on their peer-reviewed research and analysis.