Labor Market Impact of the Recession
The current recession is having an especially severe impact on employment prospects for immigrant Hispanics, according to an analysis of the latest Census Bureau data by the Pew Hispanic Center, a project of the Pew Research Center. The unemployment rate for foreign-born Hispanics increased from 5.1% to 8.0%, or by 2.9 percentage points, from the fourth quarter of 2007 to the fourth quarter of 2008.1 During this same time period, the unemployment rate for all persons in the labor market increased from 4.6% to 6.6%, or by 2.0 percentage points.
Among immigrant Latinos, the share of the working-age population (16 and older) that is employed fell by 2.8 percentage points, from 67.5% in the fourth quarter of 2007 to 64.7% in the fourth quarter of 2008. Among all persons of working age, the employment rate decreased by 1.6 percentage points, from 63.2% to 61.6%, in the first year of the recession.
The recession has also had a strong negative effect on blacks and native-born Hispanics in the labor market. Blacks are currently the only major racial and ethnic group whose unemployment rate is in double digits, 11.5% in the fourth quarter of 2008. Native-born Hispanics had the second highest rate of unemployment (9.5%) in the fourth quarter of 2008. However, changes in the employment rate and other indicators of labor market activity during the recession have been less severe for them than for foreign-born Hispanics.
This report summarizes labor market outcomes for Hispanics and other racial and ethnic groups in the ongoing recession. According to the National Bureau of Economic Research, the U.S. economy entered a recession in December 2007. The Pew Hispanic Center released two reports in 2008 that captured the early phases of the recession. The first report, in June 2008, focused on the construction slowdown and showed that outcomes for Latinos had turned markedly worse during 2007, even prior to the recession. The second report, in December 2008, showed that a small but significant decline had occurred in the share of Latino immigrants active in the U.S. labor force through the third quarter of 2008. This report updates labor market trends through the fourth quarter of 2008, capturing the first full year of the recession.
The data for this report are derived from the Current Population Survey, a monthly survey of about 55,000 households conducted jointly by the Bureau of Labor Statistics and the Census Bureau. Data from three monthly surveys were combined to create larger sample sizes and to conduct the analysis on a quarterly basis. The universe for the analysis is the civilian, noninstitutional population ages 16 and older.2
This report is not able to identify immigrants in the labor force by whether they are documented or undocumented because their immigration status is not recorded in the source data. However, estimates by the Pew Hispanic Center show that unauthorized migrants account for about 5% of the U.S. labor force and about one-third of the foreign-born labor force. They are overrepresented in certain industries such as construction, where they account for 12% of employment (Passel, 2006). Most unauthorized migrants are from Latin American countries, with those from Mexico accounting for about 55% of the total.
Working-Age Population, or the Workforce: The population of persons ages 16 and older.
Labor Force: Persons ages 16 and older who are employed or actively looking for work.
Employment Rate: Percentage of the working-age population that is employed.
Labor Force Participation Rate: Percentage of the working-age population that is employed or actively looking for work.
Unemployment Rate: Percentage of the labor force that is without work and is actively looking for work.
Labor market outcomes are tracked using a variety of indicators. Economic trends are reflected in levels of employment and unemployment, and in the employment and unemployment rates. The extent to which persons ages 16 and older participate in the labor force, either working or seeking work, is also influenced by economic conditions—people are drawn into the labor market during expansions, and they withdraw during recessions. Changes in these indicators are the key to understanding the impact of the recession on different racial and ethnic groups.
The principal findings of the analysis, organized by major labor market indicators, are presented below. More detailed data on immigrants by country of origin and year of entry, non-Hispanic immigrants, outcomes for women, and employment by industry are presented in a set of appendix tables. Those tables also contain many of the estimates discussed in the text of the report.
Unemployment and Job Losses
Changes in unemployment during the recession reveal a rapidly worsening situation for foreign-born Hispanics, native-born Hispanics and blacks in the labor market. The unemployment rates for these groups increased by similar amounts from the fourth quarter of 2007 to the fourth quarter of 2008. However, the number of unemployed persons increased at a much faster rate for foreign-born Hispanics.
- The unemployment rate for foreign-born Hispanics increased from 5.1% to 8.0%. The 2.9 percentage point rise was greater than the 2.0 percentage point increase in the overall economy as the unemployment rate for all persons rose from 4.6% to 6.6%.3
- The unemployment rate for native-born Hispanics increased from 6.7% to 9.5%, and the rate for blacks went up from 8.6% to 11.5%. The increases in the unemployment rates for these groups were similar to the increase for foreign-born Hispanics.
- The number of unemployed persons in the U.S. economy rose by 3.1 million from the fourth quarter of 2007 to the fourth quarter of 2008, an increase of 44.3%.
- The percentage increase in the number unemployed was highest among foreign-born Latinos—58.3%, or 348,000 persons. Unemployment among native-born Latinos increased by 49.1% (329,000 persons) and among blacks by 34.4% (502,000 persons).
- Job losses are now widespread across the economy, but the construction sector remains the leading source of job loss for both Hispanics and non-Hispanics. Hispanics lost 343,000 jobs in this industry, and non-Hispanics lost 844,000 jobs.
The U.S. economy employed 2 million fewer persons in the fourth quarter of 2008 than it employed in the fourth quarter of 2007. Among major racial and ethnic groups, only native-born Hispanics added jobs in the past year. But this was principally a function of demographics. The native-born Latino labor force is increasing more rapidly than the labor force for any other group—4.8% compared with only 0.7% growth in the U.S. labor force. Thus, as workers retire or leave employment for other reasons, they are increasingly likely to be replaced by native-born Hispanics.
- Outcomes for foreign-born Hispanics were the worst by both key indicators of employment—the percentage change in the number employed and the change in the employment rate.
- Employment fell for all groups except native-born Hispanics. The number of employed immigrant Hispanics decreased by 292,000, but employment of native-born Hispanics increased by 147,000. Employment of whites dropped by 1.8 million, of blacks by 314,000 and of Asians by 117,000.
- The percentage drop in employment was highest for foreign-born Hispanics. Their number employed fell 2.6%, in contrast with a loss of 1.7% for whites, 2.0% for blacks and 1.6% for Asians.
- The employment rate for all groups, including native-born Hispanics, fell from the fourth quarter of 2007 to the fourth quarter of 2008. The decrease was greatest for foreign-born Hispanics—2.8 percentage points. The employment rate for white, black and Asian workers fell 1.3, 2.0 and 1.5 percentage points respectively.
Labor market activity—gauged by the share of persons employed or actively seeking work—diminished in the face of the recession. Among all persons, labor force participation fell from 66.3% in the fourth quarter of 2007 to 66.0% in the fourth quarter of 2008, a decline of 0.3 percentage points. The greatest drop in labor force participation was registered by foreign-born Hispanics (0.8 percentage points) and Asian workers (0.9 percentage points).
- The number of Hispanic immigrants in the labor force increased by only 56,000 between the fourth quarters of 2007 and 2008, a growth rate of 0.5%. In contrast, the native-born Hispanic labor force increased 4.8% and the foreign-born non-Hispanic labor force increased 3.4%.
- Relative to the size of their population, fewer immigrant Latinos were either employed or actively seeking work in the fourth quarter of 2008 compared with a year ago. The labor force participation rate for foreign-born Latinos fell from 71.2% to 70.4%, a drop of 0.8 percentage points. In contrast, the labor force participation rate for whites and blacks fell only 0.2 percentage points each.
Latinos are an important source of workers to the U.S. economy. The working-age population in the U.S. increased 2.6 million from the fourth quarter of 2007 to the fourth quarter of 2008. Latinos accounted for 1.1 million, or 41.7%, of the total increase. In contrast to the recent past, however, the vast majority of the increase in the Latino working-age population—834,000—was native born.
The increase in the population of foreign-born Latinos has leveled off in the recent past, but it is not possible to conclude from this trend whether or not foreign-born Latinos are returning to their countries of origin in greater numbers. The trend may be due to an increased outflow of migrants, a reduced inflow of migrants or some combination of the two. Passel and Cohn (2008) found a decrease in the annual inflow of undocumented migrants to the U.S. since 2005. About four-in-five undocumented migrants come from Latin America.
- The working-age population of immigrant Latinos increased 262,000 between the fourth quarters of 2007 and 2008. That represents a 1.6% increase, well below the 5.6% increase in the working-age population of native-born Hispanics.
- The working-age population of foreign-born non-Hispanics increased 653,000, or 3.6%. This was the second highest rate of growth in the economy after native-born Hispanics.