Here’s why Latin American workers could face a huge hit in a US recession
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Troubled times are ahead for Latin American workers, according to a new Wells Fargo report.
The firm expects Latin American workers to be hit hard if a moderate recession hits in 2023, as it predicts.
“Hispanic unemployment rates tend to rise disproportionately higher than the national average during economic downturns,” wrote Wells Fargo chief economist Jay Bryson.
For example, from 2006 to 2010, the Hispanic unemployment rate rose by about 8 percentage points, while the non-Hispanic unemployment rate rose by about 3 percentage points. Bryson noted that it also rose more than the non-Hispanic unemployment rate in the early 1990s and into 2020.
Blame the composition of the work and age.
In construction, for example, Hispanics make up one-third of workers, compared to 18% of total households. According to Bryson, the interest-sensitive sector will face “hot challenges in the coming year.” Mortgage rates jumped to over 6% and the number of building permits has already fallen by more than 10% since the end of last year, he noted.
There will also be a sharper drop in spending on goods next year due to pent-up demand for services, he said. Right now, total consumer spending is 14% higher than it was in February 2020, and spending on real services is up less than 1% over the same time period.
“Spending rotation is likely to lead to more dramatic job losses in commodity-related industries other than construction, including transportation and warehousing, retail and wholesale, and manufacturing — all industries in which Hispanics make up a disproportionate share of the workforce,” Bryson said. .
However, the concentration of jobs in the leisure and hospitality sector, which has been hit hard during the pandemic, may partly offset these losses.
Not only will consumers prioritize spending on missed vacations or eating out next year, Bryson said, but employment in the industry is still about 7% below pre-pandemic levels.
When it comes to age, Hispanic workers tend to be younger than the general population.
“Junior workers tend to quit more often than older workers,” Bryson said. “Fewer years of experience makes it harder to find a new job in a weak job market.”
However, he doesn’t expect the next recession to be as damaging to the labor market as the previous two recessions.
“Employers spent most of the last five years looking for workers,” Bryson said. “We expect employers to hold on to workers more tightly than during past recessions, better understanding how difficult it is to hire them again.”
— Michael Bloom of CNBC provided the coverage.