Hispanic Unemployment Remains Resilient Despite U.S. Interest Rate Hikes

Despite slightly higher Hispanic unemployment rates, one expert said they should be higher considering U.S. interest rate hikes.

According to detailed Hispanic and Latino data from the United States Bureau of Labor Statistics, the unemployment rate among Hispanics dropped 0.6 percent from 4.9 percent in August 2023 to 4.3 percent in September 2023.

Data from the BLS showed that September 2022 had a Hispanic unemployment rate of 3.7 percent, slightly lower than September 2023. Unemployment rates for Hispanics are somewhat higher than last year, but this is not just isolated to Hispanic unemployment and could be attributed to an increase in U.S. interest rates.

Peter W. Philips, a labor economist at the University of Utah, this slight increase in unemployment across the board is a puzzle, and he's trying to figure out why the unemployment rate is not even higher.

"They've been jacking up interest rates designed to slow the economy down. You can't slow the economy down without increasing the unemployment rate. So the federal reserves interest rate policy hasn't grabbed yet, and it's quite curious," Philips said. Philips said raising the interest rates has put economists into two camps: one that speculates the increasing interest rates will allow the economy to have a soft landing, and others think worse is to come.

Philips said he is optimistic that the increased interest rates will not create a recession–but only time can tell with many factors at hand and an always-changing world. One impact of the always-changing world is the beginning of the war in Israel, which transpired over the weekend. Philips speculates that the war in Israel will increase oil prices. He said oil prices could prevent the soft landing the U.S. Federal Reserve is trying to achieve, but only time will tell.

The U.S. Federal Reserve began raising interest rates in March 2022. In March 2022, the Hispanic unemployment rate was at 4.4 percent, fluctuating between above 4 percent and under 4 percent until December 2022. The only time Hispanic unemployment went under 4 percent since then was in May 2023, when it dropped to 3.6 percent.

So, although Hispanic unemployment rates have fluctuated and been relatively above 4 percent since December 2022, Philip said that compared to the interest rate hikes the U.S. has seen, the increase in unemployment has been low.

"That slight increase in unemployment is nothing, it's absolutely nothing. The Federal Reserve key interest rate is three times higher than it was in 2022, and still, the labor market hasn't tanked," Philips said... "We're all surprised. Economists, left, right and center, are surprised by this fact. It's not necessarily a fact that's true in Europe, and so it's sort of a new thing."

Philip said although there's no exact answer as to why the labor market hasn't tanked, he attributes the relative success of the U.S. economy to the "full stops" the U.S. implemented to protect the economy during the beginning of the COVID-19 pandemic.

"The government pulled all the stops out during the pandemic when the economy fell apart. I mean, it fell apart. We've never seen an economy tank as fast and as far as it did in 2020. And then the government said, 'Alright, we're pushing interest rates to zero, and we're handing out free money.' That's what brought the economy back like it was bungy jumping off a bridge," Philips said. "That was looking like it was going to be the second great recession in a generation, but it wasn't, so if you're looking for an explanation, it may be found in how robust both the monetary and fiscal policy was to avoid that downturn."