Unemployment rate inches up during 2023, labor force participation rises : Monthly Labor Review : U.S. Bureau of Labor Statistic

In the fourth quarter of 2023, the unemployment rate averaged 3.8 percent, slightly higher than the rate of 3.6 percent in the fourth quarter of 2022.¹ The number of unemployed people was 6.3 million, up from 5.9 million at the end of 2022.² Most of this modest increase in unemployment occurred in the latter half of 2023.

Total employment, as measured by the Current Population Survey (CPS), rose over the year, although the employment­­­­–population ratio, at 60.3 percent in the fourth quarter of 2023, changed little (after removing the effects of annual adjustments to population controls introduced at the beginning of the year).³ The labor force participation rate (the percentage of the population age 16 and older who are either employed or actively seeking employment) rose to 62.6 percent. (See appendix A for more information about the CPS and the Current Employment Statistics survey. See appendix B for more information on the annual adjustments to CPS population controls.)

This article highlights a broad range of economic indicators from the CPS to provide a picture of labor market performance in 2023, both overall and for various demographic groups. This article provides 2023 updates on usual weekly earnings, labor force flows, and those not in the labor force. It summarizes recent changes in the employment situations of veterans, people with a disability, and the foreign born. This article also presents new data on people who teleworked or worked at home for pay.

Unemployment increased among men in 2023

In 2023, the overall number of unemployed people changed little through the second quarter, but this number edged higher in the third quarter and remained near this level for the remainder of the year. There were 6.3 million unemployed people in the fourth quarter of 2023, up from 5.9 million a year prior. The unemployment rate showed little movement through the second quarter of 2023 but then rose slightly; the unemployment rate averaged 3.8 percent in the fourth quarter. This was up by 0.2 percentage point from the fourth quarter 2022 average of 3.6 percent. (See chart 1.)

The modest increase in unemployment in 2023 was concentrated among men. The number of unemployed men rose by about 400,000 (to 3.6 million) from the fourth quarter of 2022 to the fourth quarter of 2023, and their unemployment rate increased by 0.4 percentage point to 4.0 percent. In contrast, the number of unemployed women held relatively steady in 2023. At around 2.8 million in the fourth quarter, the number of unemployed women was little different from a year earlier; their jobless rate was also little changed over the year at 3.5 percent. (See table 1.)

Unemployment rate for Black people hovered near its record low during 2023

The jobless rate for Black people was little changed over the year at 5.6 percent in the fourth quarter of 2023 and remained near the historic low of 5.4 percent (for the quarterly series), but Black people continued to have the highest unemployment rate among the major race and ethnicity groups.⁴ By comparison, the unemployment rate for Asians edged up over the year to 3.2 percent in the fourth quarter of 2023. The jobless rates for Whites and Hispanics both rose over the year to 3.4 percent and 4.8 percent, respectively.⁵ (See chart 2.)

Jobless rate of prime-working-age women near prepandemic low

The unemployment rate for people 16 to 24 years old changed little in 2023. Within this age group, the pattern differed for teenagers and young adults. The jobless rate for teenagers (those ages 16 to 19) edged up from 10.8 percent in the fourth quarter of 2022 to 12.1 percent in the fourth quarter of 2023. The jobless rate for young adults (those ages 20 to 24), which tends to be much lower than that for teenagers, also fluctuated during the year; it measured 6.7 percent in the fourth quarter, which was little changed from the rate recorded at the end of 2022. (See table 2.)

Overall, the unemployment rate for people of prime working age (those ages 25 to 54) changed little over the year, at 3.2 percent in the fourth quarter of 2023. However, the pattern varied by sex, as the unemployment rate for men of prime working age increased by 0.4 percentage point to 3.4 percent, while the rate for prime-working-age women was little changed over the year, at 3.0 percent.

The unemployment rate for workers age 55 and older was 2.8 percent in the fourth quarter of 2023, an increase of 0.3 percentage point from a year earlier. The jobless rate for men in this age group (3.0 percent) increased over the year, while the rate for women age 55 and older (2.7 percent) was little changed.

Unemployment rate edged up for people with less than a high school diploma

Among workers age 25 and older, jobless rates tend to be higher for people with less education, and this pattern continued in 2023. The jobless rate for people with less than a high school diploma—which in recent years has been two to three times higher than the rate for those with a college degree—edged up to 6.1 percent in the fourth quarter of 2023 (the rate was 5.2 percent at the end of 2022). (See table 3.)

Unemployment rates were little changed over the year for high school graduates with no college (4.1 percent), those with some college or an associate’s degree (3.0 percent), and people with a bachelor’s degree and higher (2.1 percent). (See chart 3.)

The number of people unemployed 5 to 26 weeks increased in 2023

The number of short-term unemployed people (those who were jobless for less than 5 weeks) was little changed over the year at 2.2 million in the fourth quarter of 2023. This group accounted for 34.2 percent of unemployed individuals, down from 37.6 percent in the fourth quarter of 2022. The number of long-term unemployed people (those who were jobless for 27 weeks or longer) was also little changed over the year at 1.3 million; the long-term unemployed accounted for 19.7 percent of all unemployed individuals in the fourth quarter of 2023. This percentage was little different from 20.1 percent in the fourth quarter of 2022. (See table 4.)

The increase in the number of unemployed people in the latter half of 2023 was reflected in the number of people unemployed 5 to 14 weeks and 15 to 26 weeks. Those unemployed 5 to 14 weeks rose by 192,000 over the year (to 1.9 million), while those unemployed 15 to 26 weeks increased by 244,000 (to 1.0 million). The share of those unemployed 15 to 26 weeks increased to 16.3 percent by the end of 2023, up from 13.5 percent in the fourth quarter of 2022. (See chart 4.) In the fourth quarter of 2023, the median duration of unemployment was 9.1 weeks, an increase from the figure of 8.2 weeks recorded at the end of 2022. The average (mean) duration of unemployment in the fourth quarter of 2023 was 21.1 weeks, little different from a year prior.

Number of job losers increased over the year

Unemployed people are grouped by their reason for unemployment. The first group, job losers and people who completed temporary jobs, consists of people who completed a temporary job, were on temporary layoff, or permanently lost their job. The second group, job leavers, voluntarily left their job. The third group, reentrants, reentered the labor force after a period of labor market inactivity. The fourth group, new entrants, consists of people who entered the labor force for the first time.

The increase in unemployment in 2023 was concentrated among job losers and people who completed temporary jobs. The number of people in this group rose to 3.1 million in the fourth quarter of 2023, up from the average of 2.7 million in the fourth quarter of 2022. (See table 4.) These individuals accounted for nearly one-half of the unemployed at the end of 2023. Within this group, the number of permanent job losers rose by 269,000 over the year to 1.6 million. The number of unemployed people on temporary layoff edged up over the year to 903,000 in the fourth quarter of 2023. (See table 4 and chart 5.)

The number of reentrants to the labor force was essentially unchanged over the year at 1.8 million in the fourth quarter of 2023; reentrants accounted for 28.5 percent of the unemployed. The number of new entrants to the labor force edged up over the year to 598,000 in the fourth quarter, and new entrants comprised 9.5 percent of the unemployed.

The number of unemployed job leavers—people who voluntarily left their jobs—changed little over the year; there was an average of 818,000 people in this group in the fourth quarter of 2023. Job leavers accounted for 13.0 percent of unemployed people at the end of 2023.

Unemployment rates for most major occupational groups showed little or no change from 2022 to 2023

The jobless rate was unchanged from 2022 to 2023 for people who had worked in the large category of management, professional, and related occupations; the rate averaged 2.0 percent in both years. (Data are annual averages.) The unemployment rates also showed little or no change for sales and office occupations (3.6 percent in 2023); natural resources, construction, and maintenance occupations (4.4 percent); and production, transportation, and material moving occupations (4.9 percent).

From 2022 to 2023, the unemployment rate for people who had worked in service occupations before becoming unemployed declined by 0.3 percentage point to 4.5 percent. Among service occupations, the lowest unemployment rates were in protective service occupations (2.9 percent) and in healthcare support occupations (3.5 percent). (See table 5.)

All six alternative measures of labor underutilization increased over the year

The U.S. Bureau of Labor Statistics (BLS) uses CPS data to construct six alternative measures of labor underutilization.⁶ These measures are known as U-1 through U-6 (U-3 is the official unemployment rate). Each measure provides different insights into the labor resources that are being underutilized, but they tend to show similar cyclical patterns. (See the box note that follows for more information about the six measures of labor underutilization.)

Each of the six alternative measures of labor underutilization increased from the fourth quarter of 2022 to the fourth quarter of 2023. Alternative measures U-1 through U-5 each saw an increase of 0.2 percentage point. By the fourth quarter of 2023, U-1 rose to 1.4 percent; U-2 rose to 1.8 percent; U-3 rose to 3.8 percent; U-4 rose to 4.0 percent; and U-5 rose to 4.6 percent. U-6 saw the largest increase over the year, 0.5 percentage point, to 7.1 percent. (See chart 6.)

Percentage of people remaining unemployed trended up over the year

A great deal of underlying movement contributes to the relatively small over-the-month net changes that typically occur in the different labor force statuses. These gross movements are captured by data on labor force flows, which show that millions of people move between employment and unemployment each month, while millions of others leave or enter the labor force.⁷ In 2023, 15.6 million people, 5.8 percent of the population, changed their labor force status in an average month. Examining the current status (employed, unemployed, or not in the labor force) of people who were unemployed in the previous month provides another perspective on the modest changes in the unemployment picture for 2023.

Historically, unemployed people have been more likely to remain unemployed from one month to the next than to either find employment or to leave the labor force. The likelihood of unemployed people remaining unemployed trended up over the year; this outcome provides further support for some cooling of the labor market in 2023. In December 2023, the share of unemployed people who remained unemployed was just under half, at 48.9 percent (calculated as a 3-month moving average). This was 3.3 percentage points higher than its value of 45.6 percent at the end of 2022. In December 2023, 27.7 percent of people who were unemployed a month earlier found work, while 23.4 percent stopped looking for work and left the labor force. These measures were 29.1 percent and 25.2 percent, respectively, a year earlier. (See chart 7.)