Wells Fargo reports a 2023 recession would disproportionately affect Latinos
As Latinos make up multiple highly cyclical industries, a recession would mean numerous layoffs, affecting Latinos the most.
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On Sept. 15, 2022, Wells Fargo released a report estimating that should a mild recession occur in 2023, Latinos would be disproportionately affected by it in comparison to non-Latinos.
The report has found that this is because Latinos face higher unemployment rates than non-Latinos during economic downturns.
For example, after the 2007-2009 recession, Latino unemployment rose by 8%, rising to 13% in comparison to non-Latinos who only experienced a 5% increase in their unemployment rate.
Insight into why Latinos are hit so hard by recessions may in part be due to the type of jobs Latinos most frequently occupy.
While Latinos make up 18% of total household employment across the nation, Latinos account for one-third of all workers in the “highly-cyclical” construction industry which has a history of notable losses in jobs in previous recessions.
Additionally, Hispanics have high rates of employment in other similarly cyclical industries, such as transportation, warehousing, and nondurable manufacturing. In the most recent recession, the COVID-19 pandemic hit the leisure & hospitality industry, though the industry is expected to withstand the next recession.
Another noticeable impact on Latinos is that during a recession, the pay gap between Latinos and non-Latinos either stops shrinking, or grows wider.
Dr. Jay H. Bryson, co-author of the Wells Fargo report, has noted that the reasons for this are related to Latinos being overrepresented in these cyclical industries.
As these industries have experienced job losses in the three recessions before the pandemic, future job losses in a 2023 recession would decrease the median wage of these industries, stalling or reversing progress on closing the wage gap.
As seen in the aftermath of the 2007-2009 recession, in 2010 real median weekly earnings for all workers fell by 1.3%, where Latinos suffered from a 3.7% loss.
Part of why Latinos face difficulties in a recession is due to Latinos lower average age.
The Wells Fargo report has estimated that as the Latino population skews younger — an estimated 60% of Latinos being between the ages of 25 and 54 — with a median age of 30; 10 years younger than the median for all non-Hispanics.
What this means is that Latinos are less likely to hold senior positions and have less experience than their non-Latino counterparts, increasing the likelihood of being laid off in a recession and worse chances of finding a job in a weak market.
States where Latinos make up a significant percentage of the population are likely to be impacted by Latino unemployment, primarily states such as New Mexico (50.1%), Texas (40.2%), California (40.2%), Arizona (32.3%) and Nevada (29.9%).
These states are predicted to suffer from lingering economic downturns as the labor market recovers, though in states like California and Florida, the residential housing construction is still recovering from the 2020 recession.
Dr. Bryson advises that one precaution against a possible recession is to begin building a network of professional connections that can provide information about job openings at different firms, or different industries if need be.