May 2, 2005

Latino Labor Report, 2004

II. Long-term Trends Show Progress in 2004

This report analyzes labor market outcomes for Hispanic and immigrant workers in the one-year period from the fourth quarter of 2003 to the fourth quarter of 2004. The present section of the report sets the stage by reviewing trends in the major labor market indicators from 2000 to 2004. The main analysis begins in the second section which reports on changes in employment and related outcomes in 2004. The third to fifth sections examine changes in employment by selected characteristics of workers and occupations. That is followed by an analysis of the concentration of immigrant Hispanics in specific occupations. The final section presents data on the wages of different groups of workers.

The analysis of long-term trends in this section finds signs of improvement in the major labor market indicators in 2004. The improvement for Hispanic workers, especially in the unemployment rate, was more notable than for non-Hispanic workers. As a result, Hispanic workers closed the gap in the unemployment rate in comparison with non-Hispanics and this gap is now the smallest it has been at any point since 2000. For some indicators the progress in 2004 was the first positive development since 2000. Employment growth began to keep pace with changes in the working-age population and the ongoing decline in the propensity of workers to participate in the labor force was partially stemmed in 2004. But participation in the labor force remains at low levels compared with 2000 and suggests a lack of confidence on the part of both Hispanic and non-Hispanic workers.

The long-term trends in key labor market indicators and their progress in 2004 are summarized in Charts 1 to 3. The year 2000 was the highpoint for all major employment related indicators. The unemployment rates for Hispanics and non-Hispanics were at their lowest levels in decades—below 6 percent for Hispanics and less than 4 percent for non-Hispanics. Similarly, a greater proportion of the working-age (ages 16 and older) population, as measured by the employment-to-population ratio, was employed in comparison with previous decades. Fueled by high demand, the proportion of the working-age population choosing to participate in the labor force, or the labor force participation rate, had also climbed to its highest level in decades. But all this came to an end with a recession in 2001 and an economic slowdown that persisted into 2003. The unemployment rate increased from the beginning of 2001 to the middle of 2003 and the employment-to-population ratio and the labor force participation rate fell steadily from 2001 to the end of 2003. In a long awaited development, the first positive signs of change appeared in mid-2003 when job growth began to accelerate for both Hispanic and non-Hispanic workers.4 These gains have been largely sustained through 2004.

The unemployment rate for Hispanics has declined sharply in the past 18 months and at a faster pace than for non-Hispanics. Following the recession, the unemployment rate for Hispanics peaked at 8.2 percent in mid-2003. It has declined steadily thereafter (Chart 1). There was a temporary reversal in the trend at the start of 2004 but for most of the year the Latino unemployment rate remained less than 7 percent. That contrasts with 2003 when the unemployment rate for Hispanics was consistently greater than 7 percent. The improvement was sustained into 2005 and by the end of March the Latino unemployment rate had dipped to 5.7 percent, almost as low as the levels attained before the 2001 recession. The unemployment rate for non-Hispanics has also decreased since mid-2003 but at a slower pace. Consequently, the gap in the unemployment rate between Hispanics and non-Hispanics is currently the smallest it has been at any point since 2000.

The economic recovery in 2004 was sufficient to reverse a four-year decline in the employment-to-population ratio for Hispanics (Chart 2).5 The proportion of the Hispanic working-age population that is employed had hit bottom at 62.5 percent in early 2004. While the ratio remains below its peak in 2000 it showed the first consistent signs of improvement in five years in 2004. Non-Hispanics also stemmed the long-lasting decline in the employment-topopulation ratio but, for them, 2004 is best described as a holding pattern rather than a year of forward movement in this indicator. Overall, the turnaround in the employment-to-population ratio in 2004 was more impressive for Latinos.

The labor force participation rate is one indicator that continues to signal the presence of slack in the labor market (Chart 3).6 Hispanics appear to have stopped the four-year decline in this indicator but the same cannot be said of non-Hispanics. For Latinos, the low point for the labor force participation rate—67.5 percent—was reached in early 2004. After showing mixed progress for the next few months, the Latino participation rate is currently slightly greater than its low point in early 2004. But the losses sustained by this indicator since 2000 remain largely in place. The situation remains more unsettled for non-Latino workers as they continue to participate in the labor market at a lesser rate than before. For non-Hispanics, the labor force participation rate at the end of 2004 was smaller than at any point since 2000.

In sum, long-term trends in key labor market indicators showed improvement in 2004, largely for the first time since 2000. Progress for Hispanic workers, especially with respect to the unemployment rate, was more rapid than for non-Hispanic workers. The growth in employment also kept pace with the change in the working-age population for the first time in five years. But, compared with 2000, the labor force participation rate remains at low levels and reveals a lack of confidence on the part of both Hispanic and non-Hispanic workers. The lack of improvement in the labor force participation rate means that there is a pool of workers waiting to reenter the labor market as economic conditions improve. When they return to the labor force, many will count among the unemployed until they secure a job and the initial result could be an increase in the unemployment rate. Thus, it will take more rapid economic growth to sustain both an increase in labor market participation and a reduction in the unemployment rate for all workers.

  1. The experiences of Hispanic workers during the recession and in the subsequent jobless recovery were documented in three earlier reports by the Pew Hispanic Center: “Jobs Lost, Jobs Gained: The Latino Experience in the Recession and Recovery” (October 2003), “Latino Labor Report, 2003: Strong but Uneven Gains in Employment” (February 2004), and “Latino Labor Report, First Quarter, 2004: Wage Growth Lags Gains in Employment” (June 2004).
  2. The employment-to-population ratio is the ratio of the number employed to the working-age population (ages 16 and older).
  3. The labor force participation rate is the proportion of the working-age population that is either at work or actively seeking work.