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Turbulent times could be ahead for Hispanic workers, a new report from Wells Fargo shows.
The company expects Spanish workers to take a major hit if a mild recession hits in 2023, as it predicts.
“Spain’s unemployment rate often rises disproportionately above the national average during economic downturns,” wrote Jay Bryson, chief economist at Wells Fargo.
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 into 2020, Bryson noted.
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Job composition and age are to blame.
In construction, for example, Hispanics account for a third of workers, compared to 18% of total household employment. The rate-sensitive sector will face “acute challenges” in the coming year, Bryson said. Mortgage rates have risen above 6% and building permits have fallen by more than 10% since the end of last year, he stressed.
There will also be a sharper decline in spending on goods in the coming year, thanks to pent-up demand for services, he said. Currently, total consumer spending is 14% higher than in 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 job losses in goods-related industries outside of construction, including transportation and warehousing, retail and wholesale, and manufacturing — all industries in which Hispanics represent a disproportionate share of the workforce,” Bryson said.
However, job concentration in the leisure and hospitality sector, which was hit hard during the pandemic, may offset some of those losses.
Not only will consumers prioritize missed vacations or dining out in the coming year, but manufacturing employment is still about 7% below pre-Covid levels, Bryson wrote.
When it comes to age, Hispanic workers tend to be younger than the general population.
“Junior workers are fired more often than senior workers,” Bryson said. “Fewer years of experience makes it more difficult to find new work in a weak labor market.”
However, he does not expect the next downturn to be as damaging to the labor market as the previous two recessions.
“Employers have spent most of the past five years struggling to find employees,” Bryson said. “We expect employers to hold on to workers more tightly than during previous recessions as they better understand how difficult it can be to re-hire them.”
— CNBC’s Michael Bloom contributed to the report.