They may suffer job losses given their concentration in vulnerable jobs.
(Bloomberg) — Hispanic and Latino workers may bear an undue hit in a US recession, according to a Wells Fargo & Co. report, which noted their concentration in industries such as construction that are vulnerable to economic downturns.
Although Hispanics and Latinos make up 18% of total household employment, they account for one in three workers in the construction sector, economists led by Jay Bryson said in a report Thursday.
These workers also have high rates of employment in transportation and warehousing, as well as nondurable manufacturing and leisure and hospitality — all of which have suffered steeper-than-average losses in past recessions.
The US labor market has remained robust in recent months in the face of decades-high inflation, rising interest rates and an uncertain economic outlook. Although the unemployment rate for Hispanic and Latino workers, at 4.5% in August, is higher than the 3.7% national average, it remains relatively low historically.
Still, construction in particular is sensitive to interest-rate increases and with the housing market already cooling down, adjacent sectors will suffer. The Federal Reserve is expected to maintain its aggressive policy of raising rates at its meeting next week to combat stubbornly high inflation. Wells Fargo forecasts what it calls a “modest” recession in 2023.
“Interest rate-sensitive sectors like construction likely will face particularly acute challenges in the year ahead,” the economists said. “These rate increases will put a damper on residential and nonresidential construction as well goods-producing industries, which likely will lead to some retrenchment in terms of Hispanic labor market outcomes.”
In addition, the median age of Hispanics last year was about 30, a decade younger than non-Hispanics, a trend that extends to the workforce, according to the Wells Fargo report. Younger people tend to be laid off before those with more seniority, which can also crimp their wage growth.
Hispanics and Latinos have also suffered disproportionately during past recessions. Their unemployment rate jumped eight percentage points to 13% from 2006 to early 2010. By contrast, the rate for non-Hispanic workers grew by about five percentage points during the same period.
States with significant Hispanic or Latino populations will feel these labor-market pains most acutely, the analysts said. Half of New Mexico’s population is Hispanic or Latino, while four in 10 people in both California and Texas are.
“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,” Wells Fargo said.
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