The Fed says unemployment will rise. Here’s who economists say would lose their jobs first.

The Federal Reserve intensified his fight against inflation this week, instituting a major rate hike and saying others are likely to follow. These measures will lead to an increase in the number of unemployed Americans by the end of next year, the central bank said.

The Fed has proposed a series of aggressive interest rate hikes in recent months as it attempts to curb price increases by slowing the economy and stifling demand. But this approach risks tipping the United States into a recession and causing widespread unemployment.

Fed Chairman Jerome Powell acknowledged on Wednesday that rate hikes would hurt the U.S. economy as growth slows and unemployment rises. He added, however, that “a failure to restore price stability would result in far greater pain later.”

The Fed’s projected job losses this week would push the unemployment rate from its current level of 3.7% to 4.4% by the end of 2023. That result would add about 1.2 million unemployed, according to Omair Sharif, the founder of research firm Inflation Insights.

Those job losses will disproportionately hit some of the most vulnerable workers, including minorities and less-educated employees, according to economists and studies of past recessions.

Here are the groups of workers who would most likely lose their jobs if unemployment increased:

Black and Hispanic workers

Black workers would be among the first to lose their jobs if unemployment rises, as they are disproportionately concentrated in industries sensitive to economic downturns. Racial discrimination often influences the choices companies make about which workers to fire, economists have said.

“The Fed’s actions really mean a disparate impact for black workers in the American economy,” Michelle Holder, a labor economist at the John Jay College of Criminal Justice, told ABC News.

The vulnerability of black workers in a downturn was evident in the most recent recession, in the spring of 2020, when the pandemic caused unemployment among black workers at all levels of education to rise compared to their white counterparts, a A RAND Corporation study found.

Overall, the unemployment rate for black workers at the start of the pandemic peaked at 16.8%, while the unemployment rate for white workers only reached 14.1%.

Between the late 1980s and mid-2000s, government employment data shows “considerable evidence” that black workers are among the first to be laid off as the economy weakens, according to a economic study published in 2010 in Demography, an academic journal.

“To be frank, discrimination still happens in the American labor market,” Holder said.

Federal Reserve Board Chairman Jerome Powell hosts an event on “The Fed is Listening: Transitioning to the Post-Pandemic Economy” at the Federal Reserve in Washington, DC on September 23, 2022.

Kevin Lamarque/Reuters

A similar dynamic of disproportionate job losses affects Hispanic workers, economists said.

William Spriggs, chief economist for the AFL-CIO union and professor of economics at Howard University, said Hispanic workers would suffer badly from a slowdown caused by rising interest rates because they are so represented. disproportionate in the construction industry.

When the Fed raises rates, it often causes mortgage rates to spike, forcing potential buyers to postpone purchases and builders to delay construction. U.S. 30-year fixed-rate mortgages jumped to 6.29% on Thursday, the highest level in 14 years, according to Freddie Mac Mortgage Market Survey.

Last year, Hispanic workers made up nearly a third of all construction workers, according to a national association of home builders. analysis government data released in June.

“We’ve already seen construction slow down,” Spriggs told ABC News. “These construction workers are the first affected.”

Less educated workers

Another group that would be among the first to be out of work during a downturn is less educated workers.

Two years ago, during the pandemic-induced recession, less-educated workers suffered far worse job losses than their better-educated peers, according to a study published in 2021 by the Institute for New Economic Thinking.

In general, when the economy weakens, workers with little education suffer a more negative effect on employment than their better-educated counterparts, according to a study published by the Minneapolis Federal Reserve in 2010.

During the Great Recession, the employment rate of workers with only a high school diploma fell by 5.6%, while the employment rate of workers with a university degree fell by less 1%, according to the study.

“Workers who tend to fare better when the economy contracts are better educated workers,” Holder said.

young workers

Data from the two most recent recessions, in 2020 and 2007, indicate that young workers suffer disproportionately when the economy contracts.

During the pandemic-induced recession, young workers became unemployed at a much higher rate than older workers, according to a study published by the Left-wing Economic Policy Institute in 2020.

From spring 2019 to spring 2020, the overall unemployment rate among workers aged 16 to 24 rose from 8.4% to 24.4%, while unemployment among workers aged 25 and over rose from 2 .8% to 11.3%, depending on the study.

A similar outcome followed the Great Recession. Between 2007 and 2010, workers aged 16 to 24 suffered a more dramatic decline in employment than any other age group, according to a Brookings Institution analysis government data focused on the ratio of employed workers in a given demographic group to its representation in the population as a whole.

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