Economic Recovery A Slog For U.S. Hispanics, But There Are Signs Of Progress

By Melissa Aparicio

The housing crash and Great Recession took a severe economic toll on Hispanics in the U.S., as the community took the biggest hit to household wealth of any demographic group.

More than four years into the recovery, Hispanics are making progress on jobs and business ownership, but continue to lag behind the national averages of key economic measures.

As the second-fastest-growing population group and a buying power projected to reach $1.5 trillion in 2015, the economic recovery of Hispanics is crucial for the overall fiscal health of the U.S., said former Labor Department chief economist Adriana Kugler, now a professor at the McCourt School of Public Policy at Georgetown University.

“This is a growing part of the labor force, of consumers and of taxpayers,” she said. “If the Hispanic community doesn’t do well, the country as a whole will be dragged back too.”


Median household wealth among Latinos plunged by 58 percent from 2005 to 2011, according to the Pew Research Center. This was the biggest drop of any racial or ethnic group.

“For typical Hispanic households, most of their nest egg was sitting in their homes and the value got wiped out in the recession,” said Richard Fry, senior economist at the Pew Research Center’s Hispanic Trends Project.

That decline was steep. In 2005, Hispanic households had $105,000 in equity in their homes. That measure plunged by more than half to $50,000 by 2011, said Fry.

But it wasn’t just the loss of equity that caused the decline in wealth. Fry adds that Hispanics have largely missed out on the stock market rally due to lower participation in retirement savings accounts that invest in the market, citing Census data that shows only 26 percent of Hispanic households had a 401(k) in 2011 versus 46 percent of white households.

“The run-up in financial asset prices hasn’t made much of a difference for the Hispanic family,” Fry said.


The jobless rate for Hispanics was 9.1 percent in October, a nearly four percentage point drop from a peak of 13 percent in November 2010, according to the Labor Department While higher than the national unemployment rate of 7.3 percent, there are some signs of strength in the labor market for Hispanics.

“The Latino unemployment rate is falling faster during this recovery than any other recovery in the past,” said Kugler.

More Latinas are also participating in the labor force, according to Kugler. Male Hispanic workers were disproportionately affected by the recession as they were more likely to work in construction, manufacturing and other industries devastated by the economic downturn. Layoffs in these industries led to Hispanic women joining the workforce, she said.

But for Algernon Austin, director of the Economic Policy Institute’s Program on Race, Ethnicity and the Economy, the employment situation for Latinos is one of stagnation. He closely tracks the employment-population ratio, or the percentage of the adult population who has a job. For Hispanics, it was 60 percent in October, the same number it was a year ago, according to the Labor Department.

“You want to see that number increasing and that will be a true indicator of improved labor market conditions,” he said. “The bright spot is that we are no longer heading downward, but we really aren’t seeing strong job growth.”


Household incomes are still below their pre-recession levels for both Hispanics and the entire country.

The median household income for Hispanics was $39,005 last year, 9 percent lower than in 2007, a year before the recession, according to the Census Bureau. The U.S. median household income was $51,017 in 2012, down 8 percent from 2007.


Overall, the number of Hispanic-owned businesses is projected to reach 3.16 million this year, a nearly 40 percent increase since 2007, according to a report by the U.S. Hispanic Chamber of Commerce and Geoscape.

While construction and other trades once dominated business startups, the sectors now seeing the fastest growth are technology and professional services firms, according to Javier Palomarez, President and CEO of the U.S. Hispanic Chamber of Commerce. And within this segment, businesses owned by Latinas are leading the growth.

“Hispanic women are at the forefront in technology and professional services,” Palomarez said.


Homeownership has been declining nationally after the housing collapse threw in flux the American dream of owning a home. The Hispanic home ownership rate in the third quarter was 48 percent, up from 46 percent in the second quarter, but well off a peak of 50 percent hit in 2008, according to the Census Bureau. The overall U.S. home ownership was 65 percent in the third quarter.

The drop in the share of Hispanics who own their homes is because most families bought houses at the peak of the boom and thus saw the biggest price declines after the crash, said Fernando Ferreira, a real estate and economics professor at the Wharton School at the University of Pennsylvania.

“Those families were deep into negative equity and their mortgages were more than the value of their homes,” Ferreira said. “I don’t think home ownership will increase in the short term because financial constraints are too big and Hispanics are still suffering a few bad effects from the crisis.”

But renting may be a safer bet for some families.

“Renting is a much better option than being a homeowner for families that don’t have stable incomes,” Ferreira said. “Transaction costs are less and it’s much easier to downsize the house.”

An increase in the supply of homes from new construction of multi-family buildings and investors turning previously-owned homes into rental units should stem the tide of rising rents we’ve seen over the past five years, Ferreira said.


The poverty rate among Hispanics ticked down to 26 percent last year from a post-recession high of 27 percent in 2010. Still, this is five percentage points higher than the 2006 low of 21 percent and nearly double America’s poverty rate of 15 percent in 2012.

“These are the groups that may suffer permanent scars,” Kugler said. “The danger is in these households getting stuck in an intergenerational poverty trap.”

Originally published at Fox News Latino.