Bump in the road: What a potential US recession means for hispanic workers [Video]
|Summary
Hispanic and Latinx workers are critical to the long-term health of the U.S. economy. Turbulent times may be ahead, however, at least on a near term basis.
If our forecast for a modest recession in 2023 comes to fruition, Hispanic workers will likely be disproportionately affected. Although the gap between the Hispanic unemployment rate and the non-Hispanic jobless rate has narrowed during recent economic expansions, the Hispanic unemployment rate tends to rise disproportionately higher than the national average during economic downturns. The Hispanic unemployment rate climbed approximately eight percentage points to roughly 13% in early 2010. By contrast, the non-Hispanic jobless rate rose by about five percentage points during the same period.
Job composition has played an important role in Hispanic workers experiencing greater job losses in recent recessions. Hispanic and Latinx individuals currently account for 18% of total household employment. But Hispanics account for one-third of workers in the highly-cyclical construction industry, which has seen pronounced job losses during the past several recessions. Hispanic individuals have high rates of employment in other industries which are even more sensitive to business cycle fluctuations, notably transportation & warehousing and nondurable manufacturing. In the most recent recession, job concentration in the leisure & hospitality sector became a vulnerability for the Hispanic community in contrast to prior downturns.
Interest rate-sensitive sectors, such as construction, likely will face particularly acute challenges in the year ahead. Prospects for another building boom in the near term look remote in light of the highly restrictive monetary policy to tackle inflation.
We expect to see a steeper drop in goods spending over the next year, as households have greater pent-up demand for services. The rotation in spending is likely to lead to sharper job cuts in goods-related industries beyond construction, including transportation & warehousing, retail and wholesale trade, and manufacturing—all industries in which Hispanics represent a disproportionate share of the workforce. Job concentration in the leisure & hospitality sector is likely to provide some offset to Hispanic job losses in the aforementioned industries if the economy does fall into a recession next year.
Joblessness tends to rise more for less-experienced workers during a recession, and the Hispanic population and labor force skews younger. The median age of Hispanics in 2021 was about 30 years, 10 years younger than non-Hispanics. Junior workers tend to be laid off at a higher rate than workers with more seniority. Fewer years of experience makes it harder to find new employment in a weak jobs market.
The earnings gap between Hispanics and all workers has narrowed on trend since the mid-1990s, but recessions tend to stall or temporarily reverse progress.
If, as we expect, employment in the construction industry turns down, states such as Texas, which have large Hispanic populations, could experience some adverse effects.
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