September 27, 2006

Latino Labor Report 2006: Strong Gains in Employment

I. Overview

The Hispanic unemployment rate reached a historic low of 5.2% in the second quarter of 2006. The gap between the seasonally-adjusted unemployment rates for Latinos and non-Latinos was just 0.6 percentage points—the smallest since 1973, when employment data on Latinos first became available. Wages for Latino workers also rose between the second quarters of 2005 and 2006, and at a faster rate than for other workers. Those developments reflect significant improvement in the labor market for Latinos in 2005-06 and indicate that the jobs recovery from the recession in 2001 is nearing completion for Hispanic workers.

The healthy job market for Latinos has been driven by the construction industry. Construction added nearly a half a million jobs alone between the second quarters of 2005 and 2006, the majority of them filled by foreign-born Latinos. Since the jobs recovery began in 2003, nearly 1 million Latinos have found jobs in construction, accounting for about 40% of all new jobs gained by Hispanics. The construction sector, however, is showing signs of a slowdown, and that could have an impact on Latino employment.

The Hispanic labor force continues to grow, primarily as a result of immigration. The rate of growth in the Latino labor force exceeds that of any other group, and the new entrants have been successful in finding employment, especially in the construction industry. Wages, however, have not kept pace with the growth in employment for all Hispanic workers. For foreign-born Latino workers, median wages decreased from the second quarter of 2005 to the second quarter of 2006.

Other groups of workers also fared well in the improving labor market. Among Asian workers, the growth in the labor force and in employment in 2005-06 rivaled that of Hispanics. Non-Hispanic whites and blacks, whose population growth is slower, also experienced an increase in the number of employed workers, though at a slower pace than Latinos and Asians. For white workers, the unemployment rate dropped below 4%, second only to Asians. Among black workers, the unemployment rate fell by nearly one percentage point, but that was due in part to reduced participation in the labor market.

Wage growth, while inconsistent across groups, tended to favor minority workers. Median wages for Latino and black workers, which started at lower levels and remained lower, increased in 2005-06, while wages of Asian and white workers declined slightly. But among foreign-born Hispanics, who represent the biggest share in the Latino labor pool, the median wage actually declined. Latinos also still have the lowest median wage of all racial and ethnic groups.

This analysis is based on data from the Bureau of Labor Statistics and the Census Bureau. Most of the data is from the Current Population Survey, a monthly Census Bureau survey of approximately 60,000 households. Data from three to six monthly surveys were combined to create larger sample sizes and to conduct the analysis on a quarterly basis or semi-annual basis.

The study reports on trends in several key labor market indicators in the past year and also since 2000, the last year for the economic expansion in the 1990s. Some of these indicators, such as the working-age population (16 and older) and the size of the labor force, respond principally to demographic forces. Tracking those indicators establishes the size of a racial or ethnic group in the labor market and whether its relative size is shrinking or expanding.

Other important labor market indicators respond more to economic developments for a racial or ethnic group. Those include employment levels, the employment rate, the unemployment rate and the labor force participation rate. Tracking those indicators, along with estimating wages, is the key to understanding the economic outcomes for Hispanic and non-Hispanic workers.

Among the major findings of this report:

A Note on Terminology

The terms Hispanic and Latino are used interchangeably in this report. The terms “whites”, “blacks” and “Asians” are used to refer to the non-Hispanic components of their population.

Foreign-born refers to an individual who is born outside of the United States, Puerto Rico or other U.S. territories and whose parents are not U.S. citizens.

The terms “jobs” and “employment” are used interchangeably in the report although they are not necessarily the same—a single worker can hold more than one job, and a job can be filled by more than one worker

Unless otherwise indicated, estimates are not seasonally adjusted.