The Federal Reserve predicts a further increase in the unemployment rate. The first to lose their jobs would be these individuals.
This week, the Federal Reserve predicts ” implemented a significant rate hike and signaled that more are likely to come in its fight against inflation. The central bank predicted that these changes will lead to a rise in the unemployment rate among American workers by the end of 2019.
In an effort to reduce price rises, the Federal Reserve has proposed a series of aggressive interest rate hikes in recent months. However, this method runs the risk of pushing the United States into recession and leading to widespread unemployment.
On Wednesday, Federal Reserve Chair Jerome Powell admitted that rate hikes will hurt the U.S. economy due to slowing growth and rising unemployment. A failure to restore pricing stability, he cautioned, would result in “much more hardship later on.”
© Kevin Lamarque/Reuters
By the end of 2023, the unemployment rate is expected to rise from its current 3.7% to 4.4% due to the job losses predicted by the Fed this week. According to Omair Sharif, founder of the research firm Inflation Insights, such conclusion would result in an additional 1.2 million people seeking employment.
Economists and analyses of previous recessions indicate that job losses will disproportionately affect minorities and those with lower levels of education.
If unemployment rates were to rise, these sectors of the workforce would be hit hardest:
1.Black and Hispanic employees
Since black workers are overrepresented in sectors vulnerable to economic downturns, they would be among the first to lose their jobs if unemployment were to rise. Economists have found that racial discrimination has a role in which employees their employers decide to let go.
Labor economist Michelle Holder from John Jay College of Criminal Justice told ABC News, “The Fed’s policies definitely do mean some disproportionate impact for Black employees in the American economy.”
A RAND Corporation study indicated that the recent recession in spring 2020 highlighted the sensitivity of Black workers in a downturn, since the pandemic led to increased unemployment for Black workers across all education levels in comparison to their white colleagues.
In the early stages of the pandemic, the unemployment rate for black workers peaked at 16.8 percent, while the unemployment rate for white workers peaked at 14.1 percent.
According to a research published in 2010 in the academic journal Demography, official employment data between the late 1980s and the mid-2000s demonstrates “strong evidence” that Black people are among the first to be let off when the economy worsens.
In a speech, Holder admitted that prejudice still exists in the American workplace.
On September 23, 2022, Federal Reserve Board Chairman Jerome Powell will host an event titled “Fed Listens: Transitioning to the Post-pandemic Economy” at the Federal Reserve in Washington, D.C.
Economists have found that Hispanic employees are hit by a similar pattern of disproportionate employment losses.
Since Hispanics are overrepresented in the construction business, the top economist for the AFL-CIO union and professor of economics at Howard University, William Spriggs, claimed that Hispanic workers would be hit especially hard by a recession caused by interest rate spikes.
When the Federal Reserve boosts interest rates, mortgage costs tend to rise, discouraging homeowners and builders alike from moving forward with their projects. According to Freddie Mac’s mortgage market survey, 30-year fixed-rate mortgages in the United States hit 6.29 percent on Thursday, the highest level in 14 years.
According to a June report from the National Association of Home Builders, which drew on government data from the previous year, Hispanic workers now account for about a third of the industry’s total workforce.
Construction activity is halting, Spriggs told ABC News. It’s going to be those people working on the construction sites who are the first to go down.
2. Those with lower levels of education in the workforce
People with lower levels of education are also more likely to lose their jobs during a recession.
According to research published in 2021 by the Institute for New Economic Thinking, during the recession caused by the pandemic two years prior, low-skilled employees lost their jobs at a much higher rate than their more-skilled counterparts.
According to research published in 2010 by the Federal Reserve Bank of Minneapolis, when the economy falters, it has a greater impact on the employment prospects of people with lower levels of education than on those with higher levels of education.
Worker employment dropped by 5.6% for those with only a high school diploma, while it dropped by less than 1% for those with a college degree, according to the report.
To paraphrase Holder, “workers who tend to do better when the economy contracts are better educated,” he remarked.
Young employees fare particularly poorly in recessions, according to data from the two most recent ones (in 2020 and 2007).
A report published in 2020 by the left-leaning Economic Policy Institute found that during the pandemic-induced recession, young employees lost their jobs at a substantially higher rate than older ones.
The survey indicated that the unemployment rate increased from 2.8% to 11.3% for those aged 25 and older and from 8.4% to 24.4% for those aged 16-24.
In the wake of the Great Depression, the same thing happened. According to a Brookings Institution analysis of government data that focused on the ratio of employed workers in a given demographic to its representation in the population as a whole, the employment rate for people between the ages of 16 and 24 dropped more dramatically than for any other age group between 2007 and 2010.