Black, Latino Employment Hurt Most by Recessions: Research

Black and Latino employment has historically been hurt the worst by recessions, according to an analysis by Investopedia of data from the Bureau of Labor Statistics. 

Unemployment is generally one of the most significant consequences of a recession, and its effects have historically lasted long after a recession ends, according to data from the National Bureau of Economic Research (NBER). 

Although the U.S. labor market has remained strong so far this year, there have been some indications of an impending recession. If the past is any example, a recession could have a disproportionate impact on Black and Latino employment.

Here is a look at how previous U.S. recessions have disproportionately affected employment recovery across different groups, and the employment divides that continue to persist.  

Dotcom Crash: Black Men and Latino Women Experienced Greater Job Losses

In 2001, the U.S. stock market crashed as the dotcom bubble burst and overvalued tech companies failed, causing a recession from April to November of that year. During this time, employment levels dipped across the board. 

In the first year, there was a 2.1% drop in the number of employed workers between the ages of 25 and 54. Two years after the start of the dotcom recession, that number dropped 2.8% below its pre-recession highs. 

Looking at the data split by race, ethnicity, and sex shows skewed impact and slower employment recovery for different groups after the recession officially ended. While the White employment-to-population ratio declines were in line with overall figures, the ratio for other racial and ethnic groups dropped by more than 3%—in some cases over 5%—two years after the recession. Employment declined 4.1% for Black men, and 5.7% for Latino women from March 2001 to March 2003.

The Great Recession: Employment Losses More Severe For Black and Latino Men

In 2007, the U.S. economy entered the worst recession since the Great Depression of the 1930s. The Great Recession, which was driven by a housing market crash, lasted from 2007 to 2009 and resulted in 8.7 million jobs lost overall in the U.S.

The percentage of prime-age employees working at the time dropped by 2.8% a year after the start of the recession, and 6.4% two years later in 2009.

Though major job losses were experienced by workers across the country, employment-population ratios for Black and Latino men decreased the most. Two years after the start of the recession, employment for Black men had dropped 10.8% and for Latino men 9.7%. In comparison, employment for White men only dropped 7.5% between December 2007 and 2009.

COVID-19 Recession: Black Men and Asian Women See Higher Employment Levels Post-Recession

When COVID-19 cases started rising across the U.S. in March 2020 and the World Health Organization declared a global pandemic, employment plummeted as a result of lockdowns and other public health restrictions. This led to one of the most severe recessions in U.S. history, though it was short-lived. 

One year after the start of the pandemic-fueled recession, the employment-population ratio dropped 4.7% from its pre-recession peak. Employment losses were 8.6% for Black women, 6.3% for Latino men and 10.9% for Latino women. 

Just two years after the start of the recession, the overall employment-population ratio was down only 1.1% from pre-recession highs, nearly a full recovery. Unlike other recent U.S. recessions, employment after two years for Black and Latino men, along with both Asian men and women, was equal to or higher than pre-recession levels. The percentage of working age Black men who are employed was 1.3% above pre-recession levels, while for Asian women, it was 1%.

It is important to note that historic amounts of government aid and the economy reopening as COVID-19 cases decreased could have made the recovery from the pandemic-fueled recession quicker compared to previous recessions.

Overall Divide Between Race, Sex, and Ethnicity Remains in Employment

Not only have the previous three recessions impacted employment unevenly, there continues to be a divide between race, ethnicity, and sex in the workforce. 

The prime-age employment-population ratio for White, Asian, and Latino men are the only groups to fall above the overall ratio at the official end of the previous three recessions. While the ratio has narrowed somewhat over the past 20 years of available data, the employment-population ratio for White men is still almost 26 percentage points higher than Latino women. 

As of February 2023, it is still unclear whether the U.S. will enter into another recession. An analysis of previous recessions shows that unless the recovery is similar to the COVID-19 recession, it's likely that Black and Latino men and women will experience a more severe effect on employment, and take longer to recover. 

Methodology

For this analysis, we looked at the employment-population ratio, which refers to the proportion of the non-institutionalized population that are employed. When changes in employment are referred to in this analysis, it refers to the employment-population ratio. 

This analysis examined changes in the employment-population ratio for workers 25 to 54 years old–generally referred to as the prime-age workforce—to make comparisons over long periods of time and account for the changing demographic makeup in the workforce. 

Data analyzed in this article are the employment-population ratio for workers 25 to 54 years old (prime-age) from the Bureau of Labor Statistics’ Current Population Survey (CPS). All year-over-year and year-over-two-year changes are for seasonally-unadjusted data series from the CPS survey for each racial, ethnic, and sex breakouts. Data for individuals with Hispanic or Latino ethnicity may be of any race. Data for Asian men and women before 2010 not included due to no data availability. Recessionary periods used in this article are those defined by the National Bureau of Economic Research (NBER) US business cycle expansions and contractions.