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Turbulent times may be ahead for Hispanic workers, according to a new report from Wells Fargo.
The company expects Hispanic workers to take a disproportionate hit if a mild recession occurs in 2023, as it predicts.
“The Hispanic unemployment rate tends to rise disproportionately relative to the national average during economic downturns,” Wells Fargo chief economist Jay Bryson wrote.
For example, from 2006 to 2010, the Hispanic unemployment rate rose about 8 percentage points, while the non-Hispanic unemployment rate climbed about 3 percentage points, the company found. It also rose more than non-Hispanic unemployment rates in the early 1990s and in 2020, Bryson pointed out.
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Job composition and age are to blame.
In construction, for example, Hispanics make up one-third of workers, compared to 18% of total household employment. The interest-rate-sensitive sector will face “acute challenges in the year ahead,” Bryson said. Mortgage rates jumped to over 6% and building permits are already down more than 10% since the end of last year, he pointed out.
There will also be a steeper drop in spending on goods over the next year, thanks to pent-up demand for services, he said. Currently, overall consumer spending is 14% higher than February 2020 and actual spending on services is up less than 1% over the same period.
“Spending rotation will likely lead to larger job losses in goods-related industries beyond construction, including transportation and warehousing, retail and wholesale trade, and manufacturing – all industries where Hispanics make up a disproportionate share of the workforce,” Bryson said. .
However, the concentration of employment in the leisure and hospitality sector, which has been hit hard during the pandemic, could offset some of these losses.
Not only will consumers prioritize spending on missed vacations or dining out over the coming year, employment in the industry is still about 7% below pre-Covid levels, wrote Bryson.
When it comes to age, Hispanic workers tend to be younger than the general population.
“Junior workers tend to be laid off at a higher rate than workers with more seniority,” Bryson said. “With fewer years of experience, it is more difficult to find a new job in a weak labor market.”
However, he does not expect the next slowdown to be as damaging to the labor market as the previous two recessions.
“Employers have spent the better part of the past five years struggling to find workers,” Bryson said. “We expect employers to retain workers more tightly than in past recessions, having a better appreciation of how difficult it is to rehire them.”
– CNBC’s Michael Bloom contributed reporting.