American bank Wells Fargo
WELLS FARGO & CO
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Estimates that if the situation in the markets continues to deteriorate into a recession – as mild as it may be – Hispanic workers will suffer a severe blow. “The Hispanic unemployment rate tends to rise disproportionately higher than the national average during recessions,” wrote the bank’s chief economist, Jay Bryson. For example, the bank notes that from 2006 to 2010, the Hispanic unemployment rate rose by about 0.8%, while the non-Hispanic unemployment rate climbed by about 0.3%.
In construction, for example, Hispanics make up a third of the workers, compared to 18% of total household employment. The sector, which is sensitive to interest rate hikes, will face “severe challenges in the coming year,” Bryson said. Mortgage rates have soared to more than 6% and building permits are already down more than 10% since the end of last year, he noted.
Also, there will be a steeper decline in commodity spending over the next year, thanks to the decline in demand. Currently, total consumer spending is 14% higher than February 2020 and real spending on services has increased by less than 1% over the same period. “The rotation in spending is likely to lead to sharper cuts in goods-related industries beyond construction, including transportation and warehousing, retail and wholesale trade, and manufacturing — all industries where Hispanics represent a disproportionate share of the workforce,” Bryson said.
However, a concentration of work in the leisure and hospitality sector, which was hit hard during the pandemic and is now recovering nicely, may alleviate some of these expected vulnerabilities. Not only will consumers prefer to go on vacations that were denied to them during the Corona period or eat out, but employment in the industry is still about 7% below the pre-corona level, Bryson wrote.
When it comes to age, Hispanic workers are generally younger than the general population. “Junior employees tend to be fired at a higher rate than employees with more seniority,” Bryson said. “Fewer years of experience makes it difficult to find a new job in a weak labor market.” However, he does not expect the next recession to hit the labor market as it has in past recessions.
“Employers have spent most of the last five years struggling to find workers,” Bryson said. “We anticipate that employers will hold on to workers more tightly than during previous recessions, with a better understanding of how difficult it may be to rehire them.”
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