Federal Reserve increased Battling inflation this week, he said he had set up a big rate hike and more would follow. According to the Central Bank, these steps will lead to an increase in the number of unemployed Americans by the end of next year.
The Fed put forth a a series of aggressive rate hikes has been trying to reduce price increases by slowing the economy and stifling demand in recent months. But the approach risks plunging the US into recession and widespread unemployment.
Fed Chairman Jerome Powell acknowledged on Wednesday that a rate hike would cause pain for the US economy as growth slows and unemployment rises. However, he added, “failure to restore price stability means more pain later.”
The Fed’s projected job losses this week will raise the unemployment rate to 4.4% by the end of 2023 from the current 3.7%. According to Omair Sharif, founder of research firm Inflation Insights, the result will add about 1.2 million unemployed people.
According to economists and studies of past recessions, these job losses will disproportionately fall on some of the most vulnerable workers, including minorities and less educated workers.
If unemployment rises, the groups of workers who will lose their jobs are:
Black and Hispanic workers
Because black workers are disproportionately concentrated in industries that are vulnerable to economic downturns, they will be among the first to lose their jobs if unemployment rises. Racial discrimination often affects companies’ choices about which workers to lay off, economists say.
“The Fed’s actions really mean some crap for black workers in the American economy,” Michelle Holder, a labor economist at John Jay College of Criminal Justice, told ABC News.
The vulnerability of Black workers in a recession was most evident during the most recent recession, in the spring of 2020, when the pandemic led to higher unemployment for Black workers at every educational level compared to their white counterparts. A RAND Corporation study found.
Overall, the unemployment rate for Black workers reached 16.8% early in the pandemic, while the unemployment rate for White workers only reached 14.1%.
Between the late 1980s and mid-2000s, government employment data show “substantial evidence” that blacks were among the first workers to be laid off as the economy weakened. economic research It was published in Demography, an academic journal, in 2010.
“Frankly, discrimination still occurs in the American labor market,” Holder said.
Federal Reserve Chairman Jerome Powell hosts an event titled “The Fed Is Listening: Transitioning to a Post-Pandemic Economy” at the Federal Reserve in Washington in September. 23, 2022.
Kevin Lamarck/Reuters
A similar dynamic of disproportionate job losses affects Hispanic workers, economists say.
William Spriggs, chief economist for the AFL-CIO and an economics professor at Howard University, said Hispanic workers would be hit hard by a recession caused by rate hikes because they are disproportionately represented in the construction industry.
When the Fed raises interest rates, it often leads to a jump in mortgage rates, which causes potential homebuyers to delay their purchases and builders to delay future construction. U.S. 30-year fixed-rate mortgages rose to 6.29% on Thursday, the highest level in 14 years. Freddie Mac’s Mortgage Market Research.
Last year, Hispanic workers made up about a third of all construction workers, according to the National Association of Home Builders. analysis From government data released in June.
“We’ve already seen a slowdown in construction,” Spriggs told ABC News. “First, those construction workers are shot.”
Less educated workers
Another group of people who will be among the first to lose their jobs during a recession are less educated workers.
Two years ago, during the pandemic-induced recession, less-educated workers suffered steeper job losses than their better-educated peers. education Published in 2021 by the Institute for New Economic Thought.
According to a 2010 study by the Minneapolis Federal Reserve, in general, when the economy weakens, poorly educated workers experience a more negative impact on employment than their better-educated counterparts.
In the Great Recession, the employment rate for workers with only a high school diploma fell by 5.6%, while the employment rate for workers with a college degree fell by less than 1%.
“The workers who tend to do better when the economy contracts are better-educated workers,” Holder said.
young workers
Data from the two most recent recessions, in 2020 and 2007, show that young workers have suffered disproportionately in the economy.
During the recession caused by the pandemic, younger workers were unemployed at higher rates than older workers. education released in 2020 by the left-leaning Economic Policy Institute.
From spring 2019 to spring 2020, the overall unemployment rate among workers aged 16-24 increased from 8.4% to 24.4%, and unemployment for workers aged 25 and older increased from 2.8% It increased to 11.3%.
A similar result occurred after the Great Recession. Between 2007 and 2010, workers between the ages of 16 and 24 experienced a steeper decline in employment than other age groups, according to the Brookings Institution. analysis of government data that focuses on the proportion of workers in a particular demographic area compared to their representation in the population as a whole.
