Unemployment Levels Will Rise In The US. Vulnerable Workers Are Bound To Lose Their Jobs First.

The Federal Reserve is battling inflation with yet another major rate increase this week, with the promise of others to follow. The Central bank warns that these hikes will create a crest in the number of unemployed Americans by the end of 2023.

The strategy of the Fed to deal with price increases and the rising demand by aggressively increasing the interest rates might as well be the force that tips the US into a recession, contributing to a large wave of unemployment across the country.

Jerome Powell, Fed Chair, acknowledged on Wednesday that the interest rate hikes will cause pain for the US economy, causing job growth to slow and unemployment levels to rise. But he also believes that Americans will have to face far greater pain later on if we fail to restore the price stability.

As forecasted by the Fed, the unemployment rate which is currently at 3.7% will rise to 4.4% by the end of 2023. The result? 1.2 million unemployed Americans, as said by Omair Sharif, the founder of research firm Inflation Insights.

Economists predict that these job losses will disproportionately fall on some of the most vulnerable workers in the US. Minorities and less-educated workers will get caught up in the center of it. The following groups are likely to lose their jobs with rising unemployment rates:

Black and Hispanic workers

Due to their disproportionate concentration in industries most affected by economic downturns, Black workers will be among the first who lose their jobs. Companies may let their layoff decisions get clouded by thoughts of racial discrimination, affecting these minorities. As found by a RAND Corporation study, the pandemic caused higher job losses for Black workers in the spring of 2020. The unemployment rate for Black workers was 16.8% while that of white workers was only 14.1% in the early days of the pandemic. A similar fate will come for Hispanic workers too. They are disproportionately represented in the construction industry and would be affected greatly by the results of the interest rate hikes.

Less-educated workers

When there’s a trend of layoffs due to interest rate hikes, less-educated workers will also be among the first to lose their jobs. During the pandemic days of the recession, less-educated workers were laid off more than educated peers. A study published by the Minneapolis Federal Reserve in 2010 states that generally, poorly educated workers will have a more negative impact than educated workers when the economy weakens. During the Great Recession, the employment rate for employees with a high school diploma only decreased by 5.6% while that of the workers with a college degree only decreased by less than 1%.

Young workers

Young workers too will suffer disproportionately when the economy contracts. During the pandemic days, we could observe young people losing jobs more than older workers. Between spring 2019 and spring 2020, the employment rate of workers aged 16 to 24 increased from 8.4% to 24.4%. The unemployment rate for workers aged 25 and older increased from 2.8% to 11.3%. Between 2007 and 2010, workers between the ages of 16 and 24 experienced a more dramatic decrease in employment than other age groups.