History could repeat itself this year as recession fears grow. The Federal Reserve continues to increase interest rates to cool off the economy, which may cause a recession and affect Black and Latino unemployment first.
William Martin knows when a recession hits, he could be one of the first to lose his job. Martin is a black man who lives in New Jersey with his wife, Melanie, and two sons– Historically, Black workers have been the first to lose their jobs in a recession. So Martin has spent years building the skills and knowledge he needs for the workforce, so he can teach his sons how to avoid layoffs in the future.
“The first ones to get laid off are the lower support people, the help desk people,” said Martin. He said that Blacks and Latinos must obtain more jobs at the directors, managers, and senior levels so they are not laid off first if a recession occurs.
The job market has been strong for Black and Latino workers in recent years, but now recession risks are rising. The Federal Reserve has continued to increase interest rates to fight high inflation, which forecasters say could cause a recession this year.
Historically, Black and Latino workers are the first to get laid off when a recession occurs because minorities typically work in lower-paying professions, have less education, or face discrimination. The economic effects could be a real risk for Black and Latino workers, resulting in them losing their jobs and impacting their livelihood.
“The impact for the workers of these families can be devastating, including an increase in poverty rates, rates of homelessness, and food insecurity,” said Michelle Holder, an economic professor at John Jay College of Criminals Justice.
To prepare for the possible recession, Martin has constantly been saving money, investing, budgeting, and not making poor decisions spending money at work and home– saving money is a big concern for him. He said Black people have to keep their money in case of a financial crisis because Black people are less likely to inherit money from previous generations.
During the Great Depression in the spring of 1933, the unemployment rate for Black workers was 50 percent compared to 25 percent for White workers–Black and Latino workers often faced discrimination and were fired to create more jobs for White workers. In the Great Recession of 2008, Black and Latinos unemployment was relatively high during the recession compared to White unemployment— but it worsened after the recession.
“We have seen in previous recessions like the Great Recession that usually minority groups have a stronger impact in terms of their unemployment rates,” said Alejandro Gutierrez-Li, an assistant professor at North Carolina State University.
Gutierrez noted that during the COVID-19 pandemic, minorities faced lower unemployment than during the Great Recession because minorities worked essential frontline jobs that were important for America to continue to thrive.
According to Pew Research, 48 percent of Black and 44 percent of Hispanics claimed they “cannot pay some bills or can only make partial payments on some of them this month” compared to 26 percent of White in the pandemic. Showing that Black and Latinos experienced greater hardship during the pandemic.
After the pandemic, the rebound was near-record low unemployment for Black and Latino workers, but it is still higher than for White. In July 2021, the unemployment rate for Black workers was 8.2 percent compared to 5.5 percent for Hispanic workers and 4.3 percent for White workers. Black workers still were twice unemployed, a trend that has not changed since the Great Depression.
Now recession fears are rising as job growth is decelerating slowly because the Fed continues to increase interest rates to cool off the economy from high inflation.
As the Federal Reserve increases interest rates, it may cause a domino effect– consumers will not want to spend as much money; therefore, supply and demand will decline, resulting in layoffs—and from a historical standpoint, Black and Latinos are the first ones to go.
Major tech companies like Microsoft and Amazon are prime examples— during the pandemic, tech companies over hired workers due to high demand for products– when people were allowed to go back outside, consumers started spending money on services rather than online items, requiring fewer workers to work— inducing layoffs.
As a result, around 130,000 layoffs have been made in the first few months of 2023. Most layoffs were caused by inflation, high-interest rates, fear of a recession, investor pressure, and over-hiring. Other industries will also start to lay off employees as product demand decreases.
Additionally, Latino unemployment shot up from 4.5 percent in January 2023 to 5.3 percent in February, another sign this could already be starting.
As recession fears grow, Brian Cherry, a black man who lives in Philadelphia, has been preparing with his wife. He mentions that he will be affected by the recession and has been saving money. He and his wife even incorporated side hustles with their regular job to make more money to offset the inflated prices of groceries.
“You got to be smart with your money and put money aside and find different side hustles to bring in more money,” said Cherry. “Everything sucks, eggs cost seven dollars, sometimes you got to do what you have to do.”