According to a recent Wells Fargo research, Hispanic employees could be in for some turbulent times.
If a minor recession occurs in 2023, as the company projects, Latino workers will be hurt particularly hard.
According to Wells Fargo chief economist Jay Bryson, during economic downturns, “the Hispanic unemployment rate tends to increase disproportionately higher than the national average.”
For instance, according to the firm, the Hispanic unemployment rate increased by nearly 8 percentage points between 2006 and 2010, while the non-Hispanic unemployment rate increased by around 3 percentage points. Additionally, it was greater than the non-Hispanic unemployment rates in the early 1990s and in 2020, according to Bryson.
The research suggests that age and the nature of the job are to blame.
For instance, Hispanics make up one-third of the workforce in construction, compared to 18% of all household employment. According to Bryson, that interest rate-sensitive industry would experience “severe challenges in the year ahead.” He noted that since the end of last year, mortgage rates have increased to over 6% and building licences have already decreased by more than 10%.
The pent-up demand for services will lead to a greater decline in goods consumption during the upcoming year as well, he said. Currently, total consumer expenditure is 14% greater than it was in February 2020, whereas spending on genuine services increased by less than 1% during the same period.
Beyond construction, “the rotation in spending is anticipated to lead to harsher job cuts in goods-related businesses.” These include transportation and warehousing, retail and wholesale trade, and manufacturing, where Hispanics make up a disproportionate fraction of the workforce.
Despite the pandemic having a significant negative impact on the leisure and hospitality sector, job concentration there may help to somewhat make up for those losses.
According to Bryson, who also pointed out that employment in the sector is still about 7% below its pre-Covid levels, consumers may prioritise spending on unfulfilled holidays or eating out in the following year.
Because Hispanic workers are often younger than non-Hispanic workers, the age issue also works against Hispanics.
According to Bryson, “junior employees tend to be laid off at a higher rate than employees with more seniority.” In a poor work market, it is more difficult to locate new employment for those with less experience.
But according to Bryson, the next recession won’t be as bad for the labour market as the last two.
“Employers have struggled to recruit workers for the better part of the last five years,” he said. We predict that companies would hang onto workers more closely than in previous recessions because they will be more aware of how challenging it may be to rehire them.