Tuesday, December 16, 2008

Latino Workers in the Ongoing Recession: 2007 to 2008

Latino Workers in the Ongoing Recession: 2007 to 2008

by Rakesh Kochhar, Associate Director for Research, Pew Hispanic Center
December 15, 2008


A small but significant decline has occurred during the current recession in the share of Latino immigrants active in the U.S. labor force, according to a Pew Hispanic Center analysis of Census Bureau data. In a year when jobs have become scarce for everyone, the proportion of working-age Latino immigrants participating in the labor force has fallen, at least through the third quarter of 2008, while the proportion of all non-Hispanics as well as of native-born Hispanics has held steady.

Jobs attract many Hispanic immigrants to the United States, and their labor force participation rate -- the proportion of the working-age population that is either working or actively seeking work -- is typically higher than the rate in the native-born population. That remains the case now.


However, among Latino immigrants, 71.3% were in the labor force at the close of the third quarter of 2008, compared with 72.4% a year earlier. This 1.1 percentage point decrease follows on the heels of a steady increase in the labor force participation rate of foreign-born Latinos since 2003 when the economy started its recovery from the 2001 recession.1 The drop in labor market activity was about twice as high among immigrants from Mexico and among immigrants who arrived in the U.S. since 2000. Among all non-Hispanics, the labor force participation rate was essentially unchanged during this period -- it was 66.2% at the end of the third quarter of 2008, up marginally from 66.0% a year earlier. Among native-born Hispanics, the rate was 66.4%, up from 66.0% a year earlier.

The absolute number of immigrant Latinos in the labor force did increase slightly -- by 150,000 -- between the third quarters of 2007 and 2008. But this increase is much smaller than it had been in previous years. And because it is also much smaller than the growth in the working-age population of Latino immigrants, the share that is active in the labor force has declined.

It is not possible to conclude from these data whether or not some of the foreign-born Latinos who left the labor force have returned to their countries of origin. The growth in the immigrant Latino population has leveled off in recent years, but it is not clear whether this has been due to an increased outflow of migrants. Passel and Cohn (2008)2 do find 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 labor market data do not paint an unrelentingly negative picture for Latino immigrants, who make up about 8% of the total U.S. labor force. Their unemployment rate in the third quarter of 2008 was 6.4%, not much higher than the 6.1% rate for the total U.S. workforce and much lower than the 9.6% rate for native-born Hispanics (who account for about 45% of the Hispanic labor force in this country). However, workers who withdraw from the labor force are not counted among the unemployed. If foreign-born Latinos had remained as active in the labor market in 2008 as they were in 2007, their unemployment rate would be much higher today.

This report analyzes labor market outcomes for workers using a variety of indicators. Some labor market indicators, such as the working-age population (those 16 and older) and the size of the labor force (those either employed or actively seeking work), respond principally to demographic forces. For immigrants, economic forces may play a stronger role in shaping the working-age population and labor force by triggering changes in inflows and outflows of migrants. Tracking those indicators establishes the size of a racial or ethnic group in the labor market and whether its relative size is expanding or shrinking.

Other important labor market indicators respond principally to economic developments. Those include employment levels and the employment, unemployment and labor force participation rates. The data for this report are derived from the Current Population Survey3 , 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.


Recession and Latino Labor

This report focuses on economic outcomes for Hispanic and non-Hispanic workers during the ongoing recession. According to the National Bureau of Economic Research, the semiofficial arbiter of these dates, the U.S. economy entered a recession in December 2007. Earlier this year, the Pew Hispanic Center released a report that analyzed labor market developments for Latinos through the first quarter of 2008.4 That report showed that outcomes for Latino workers, such as the unemployment rate, had turned markedly worse during 2007, even prior to the recession.

A year into the recession, it is now feasible to update labor market outcomes through the third quarter of 2008. These outcomes are compared with the labor market status of workers in the third quarter of 2007.5 Developments over that one-year period provide a fuller understanding of the effects of the recession on Hispanic and non-Hispanic workers, as well as on native-born and foreign-born workers.

Prior to the onset of the recession in December 2007, Latino workers seemed to be feeling the brunt of the slump in the construction sector (Kochhar, 2008).6 Their unemployment rate had climbed sharply in 2007, much more so than for non-Hispanics. Moreover, the impact on foreign-born Hispanics had been especially hard. In the first quarter of 2008, the unemployment rate for foreign-born Latinos exceeded the rate for native-born Latinos. That was the first such occurrence since 2003. Since then increases in the unemployment rate for Latino immigrants have been curbed, in part, by labor force dropouts. Absent such a withdrawal their unemployment rate today would be close to 8%.

The impact of the deepening recession is now pervasive as job losses and rising unemployment affect all workers. From the third quarter of 2007 to the third quarter of 2008, 1.7 million non-Hispanics, 287,000 native-born Hispanics and 239,000 foreign-born Hispanics are newly unemployed.

This report is not able to identify immigrant workers by whether they are documented or undocumented because the immigration status of workers 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).7 Most unauthorized migrants are from Latin American countries, with those from Mexico accounting for about 55% of the total.

The principal findings of the analysis, organized by major labor market indicators, are below. More detailed analysis and data are presented in the full report.

Working-Age Population

Latinos have remained an important source of workers to the U.S. economy during the recession. Their working-age population increased 1.1 million between the third quarters of 2007 and 2008, accounting for 42% of the total increase in the U.S. working-age population.
The contribution of foreign-born Latinos to the growth in the working-age population has leveled off. The number of immigrant Hispanics in the workforce increased 470,000 from the third quarter of 2007 to the third quarter of 2008. That was similar to the previous two years.
Labor Force

The number of Hispanic immigrants in the labor force increased by 150,000 between the third quarters of 2007 and 2008. That was not a statistically significant change, however, meaning one cannot say with certainty that the estimated change is different from zero.8
The modest growth in the foreign-born Hispanic labor force is due to diminishing numbers of those who entered the U.S. between 1990 and 1999. The working-age population of that group of immigrants is estimated to have fallen by 234,000, either as a result of deaths or departures from the U.S.
Relative to the size of their population, fewer immigrant Latino workers were either employed or actively seeking work in the third quarter of 2008 compared with a year ago. The labor force participation rate for foreign-born Latinos fell from 72.4% in the third quarter of 2007 to 71.3% in the third quarter of 2008, a drop of 1.1 percentage points.
The decrease in labor force activity among foreign-born Hispanics was led by those from Mexico or those who arrived in the U.S. in 2000 or more recently.
In contrast, the labor force participation rates for native-born Hispanics and all non-Hispanics were up slightly in the third quarter of 2008 compared with a year earlier.
Employment

Employment growth came to a halt between the third quarter of 2007 and the same period in 2008. Employment of Hispanic workers increased by 88,000, but employment of non-Hispanic workers fell by 323,000. Thus, total employment was down 235,000.
Employment of foreign-born Hispanics decreased by 90,000 and their employment rate fell from 69.1% in the third quarter of 2007 to 66.7% in the third quarter of 2008, a drop of 2.4 percentage points. The decrease in the employment rate of foreign-born Hispanics exceeded that for native-born Hispanics and non-Hispanics.
Unemployment and Job Losses

About 2.2 million workers joined the ranks of the unemployed from the third quarter of 2007 to the third quarter of 2008. The breakdown is 1.7 million non-Hispanics, 287,000 native-born Hispanics and 239,000 foreign-born Hispanics.
The unemployment rate for Hispanics increased from 5.7% to 7.9%. The 2.2 percentage point rise was less than the 1.2 percentage point increase for non-Hispanics, whose unemployment rate went from 4.6% to 5.8%.
The unemployment rate for native-born Hispanics rose sharply from 7.1% in the third quarter of 2007 to 9.6% by the third quarter of 2008, an increase of 2.5 percentage points.
The unemployment rate for immigrant Latinos, which stood higher than the rate for native-born Hispanics in the first quarter of 2008, has now dropped to its familiar perch below. For foreign-born Hispanics, the rate increased from 4.5% to 6.4% between the third quarters of 2007 and 2008.
The increase in the unemployment rate for foreign-born Hispanics would have been greater if not for the fact that many of these workers withdrew from the labor market. Absent any withdrawal from the labor market, it is estimated the unemployment rate for foreign-born Hispanics in the third quarter of 2008 would have been 7.8% rather than 6.4%. That means their unemployment rate would have increased 3.3 percentage points since the third quarter of 2007, the greatest increase among the groups examined in this study.
The construction sector was the leading source of job losses for both Hispanic and non-Hispanic workers. Hispanics lost 156,000 jobs in this industry, and non-Hispanics lost 544,000 jobs.
Wages

Median weekly wages in constant dollars fell 1.4% for non-Hispanics from the third quarter of 2007 to the third quarter of 2008. Wages for Hispanic workers, however, were unchanged.
Weekly wages for native-born Hispanics decreased 1.9%. Surprisingly, wages for foreign-born Hispanics are estimated to have increased 5.5% since the third quarter of 2007. That may be a result of low-wage immigrants departing the labor force.
Read the full report at pewhispanic.org

Notes

1 The labor force participation rate of foreign-born Hispanics had decreased by somewhat larger magnitudes in 2003 in comparison with 2002. That year marked the tail end of a nearly three-year long period of an economic slowdown, including a recession in 2001.
2 Trends in Unauthorized Immigration, http://pewhispanic.org/reports/report.php?ReportID=94 Pew Hispanic Center, Oct. 2 2008.
3 www.census.gov/cps/
4 Released in June 2008, this report focused on the impact of the construction slowdown on Latino workers (see Kochhar, 2008).
5Estimates in this report account for the annual revisions to the weights in the source data, the Current Population Survey. Details are provided in Appendix A.
6Rakesh Kochnar, "Latino Labor Report, 2008: Construction Reverses Job Growth for Latinos," Pew Hispanic Center, June 2008.
7Size and Characteristics of the Unauthorized Migrant Population in the U.S., Pew Hispanic Center, Mar. 7, 2008.
8All tests of statistical significance in this report are conducted at the 90% level of confidence. If a number is not significantly different from zero, it means that there is a 90% chance the number lies within a range that encompasses zero.

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