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Latinas contributed $1.3 trillion to U.S. economy, new report says. That number could be even bigger

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Miami Beach, Florida, Manolo, restaurant, employees at bakery counter. (Photo by: Jeffrey Greenberg/Universal Images Group via Getty Images)

Jeff Greenberg | Universal Images Group | Getty Images

Latinas are making substantial contributions to the U.S. economy.

The female Hispanic population contributed $1.3 trillion to gross domestic product in 2021, an increase from $661 billion in 2010, according to a recent report funded by Bank of America.

That marks a real GDP growth rate of 51.1% between 2010 and 2021, meaning an economic contribution that’s 2.7 times that of the non-Hispanic population.

The total output of U.S. Latinas in 2021 was also larger than the entire state of Florida that year, the report noted, citing data from the Bureau of Economic Analysis. In fact, only those from California, Texas and New York, respectively, were larger that year.

Despite those large figures, some economists think that U.S. Latinas could be contributing more to GDP than the report’s figure.

Belinda Román, an associate economics professor at St. Mary’s University, said that there’s activity in various areas that the data may not be capturing. Child care is one of those.

“A lot of that is uncompensated care,” she said in an interview with CNBC. “Interestingly, there are a lot of Latinas in that space that you’re not going to see in these numbers, so I think to some extent it may not be big enough actually.”

Economist Mónica García-Pérez also believes the figure could be bigger, saying that some of Latinas’ “unmeasured” contributions — such as being a stay-at-home mom that’s providing care for other neighbors’ kids, for example — allow “other groups to participate in the labor market.”

She also pointed to the occupational positions they hold more generally as posing some difficulty when assessing their contributions.

“This group is very sensitive to shocks, and it could be related to their presence in sectors where there’s a lot of mobility or turnover,” the Fayetteville State University economics professor said. She added that they tend to be concentrated in care and service industries, such as health care, retail and hospitality. This is what makes them a “moving piece” in economic cycles.

In the case of a recession, for instance, García-Pérez said Latinas are “likely to lose their job much faster being in the sectors they’re in,” as seen during the Covid-19 pandemic. “But they also may be more likely to be reincorporated in the market because the cost of entry and the type of positions they enter at have lower barriers.”

A growing force

When it comes to labor force participation, Latinas are outpacing other groups, the BofA report showed.

From 2000 to 2021, the participation rate for Latinas rose 7.5 percentage points. On the other hand, the participation rate of the non-Hispanic women in the same period was flat.

The group has also been more resilient than others. Although labor force growth slowed overall in 2020, the growth rates for Hispanic men and women were still positive. Conversely, the non-Latino labor force growth rate was negative that year, meaning that more people left the labor force than entered it.

Beyond that, Latina GDP grew more than five times the rate of non-Latino GDP between 2019 and 2021, gaining 7.7% compared to 1.5%. Meanwhile, the GDP of Hispanic men grew nearly four times the rate of non-Latino GDP in those years at 5.9%.

These contributions are notable given that Latino households were some of the hardest hit by the pandemic.

“When the economy broadly is most in need, that’s actually when we see the most dramatic contributions of U.S. Latinas,” said economist Matthew Fienup, the report’s co-author and executive director of the Center for Economic Research and Forecasting at California Lutheran University. “Whereas all Latinos are a source of economic strength, Latinas are drivers of vitality that the economy needs.”

“If Covid-19 couldn’t stop this growth, it’s hard to see what would,” said David Hayes-Bautista, report co-author and director of the Center for the Study of Latino Health and Culture at the School of Medicine at UCLA.

Drivers of change

Since the late 1970s, the share of Latinas with a job has grown. Specifically, the employment-to-population ratio for the group has surged from 41.6% in December 1978 to 56% in December 2023, per data from the Economic Policy Institute.

By comparison, the ratio for Black women — who alongside Latinas experience the most severe wage gaps relative to white, non-Hispanic men — has advanced 11.9 percentage points. The metric for women overall has climbed by 8.8 percentage points in that period.

“Some of this is an expansion of opportunities for women,” said Elise Gould, a senior economist at EPI. Part of this is also due to a lack of wage growth for typical workers over the past few decades, she said. “Because it can be hard to get ahead, households may have had to put in more work hours to do better.”

That seems to be paying off to some extent. The growth in labor force participation as well as a rise in educational attainment are resulting in income gains for the group, notably about 2.5 times that of non-Hispanic women from 2010 to 2021, the BofA’s report co-authors found.

Brooklyn Puerto Rico Day Parade on June 13, 2021 on Knickerbocker Avenue in the Bushwick neighborhood of Brooklyn, New York.

Andrew Lichtenstein | Corbis News | Getty Images

Hayes-Bautista also cited intergenerational shifts and Hispanic women’s more rapid population growth over the Hispanic male and non-Latino populations as another catalyst of Latinas’ economic output.

“What we started to see in about the year 2000 is that the immigrant first-generation started to age out of the labor force,” he said. “As they age out, their shoes are being filled by their daughters and granddaughters, who are twice as numerous in terms of population size, and they’re bringing much higher levels of human capital.”

Latinas have especially bolstered the contributions of Latinos as a whole. Fienup told CNBC that Latinos’ total contributions have pushed labor force growth positive in certain regions across the country at times when the non-Latino labor force was contracting.

“We expect that dynamic to be increasingly important over the next three decades,” he said. “What we’re seeing now is really just the beginning of what will be an increasingly important story in the United States economy.”

Economics

UK inflation, November 2024

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The columns of Royal Exchange are dressed for Christmas, at Bank in the City of London, the capital’s financial district, on 20th November 2024, in London, England.

Richard Baker | In Pictures | Getty Images

LONDON — U.K. inflation rose to 2.6% in November, the Office for National Statistics said Wednesday, marking the second straight monthly increase in the headline figure.

The reading was in line with the forecast of economists polled by Reuters, and climbed from 2.3% in October.

Core inflation, excluding energy, food, alcohol and tobacco, came in at 3.5%, just under a Reuters forecast of 3.6%.

Headline price rises hit a three-and-a-half year low of 1.7% in September, but was expected to tick higher in the following months, partly due to an increase in the regulator-set energy price cap this winter.

“This upwards trajectory looks set to continue over the next few months,” Joe Nellis, economic adviser at accountancy MHA, said in emailed comments on Wednesday, citing the energy market and “the long-term pressure of a tight domestic labor market.”

Persistent inflation in the services sector, the dominant part of the U.K. economy, has led money markets to price in almost no chance of an interest rate cut during the Bank of England’s final meeting of the year on Thursday. Those bets were solidified earlier this week when the ONS reported that regular wage growth strengthened to 5.2% over the August-October period, up from 4.9% over July-September.

The November data showed services inflation was unchanged at 5%.

If the BOE leaves monetary policy unchanged in December, it will finish out the year with just two cuts of its key rate, bringing it from 5.25% to 4.75%. The European Central Bank has meanwhile enacted four quarter-percentage-point cuts and this month signaled a firm intention to move lower next year.

The U.S. Federal Reserve is widely expected to trim rates by a quarter point at its own meeting on Wednesday, taking total cuts of the year to a full percentage point. Some skepticism lingers over whether it should take this step, given inflationary pressures.

This is a breaking news story and will be updated shortly.

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The Fed has a big interest rate decision coming Wednesday. Here’s what to expect

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Federal Reserve Chair Jerome Powell speaks during a news conference following the November 6-7, 2024, Federal Open Market Committee meeting at William McChesney Martin Jr. Federal Reserve Board Building, in Washington, DC, November 7, 2024. 

Andrew Caballero-Reynolds | AFP | Getty Images

Inflation is stubbornly above target, the economy is growing at about a 3% pace and the labor market is holding strong. Put it all together and it sounds like a perfect recipe for the Federal Reserve to raise interest rates or at least to stay put.

That’s not what is likely to happen, however, when the Federal Open Market Committee, the central bank’s rate-setting entity, announces its policy decision Wednesday.

Instead, futures market traders are pricing in a near-certainty that the FOMC actually will lower its benchmark overnight borrowing rate by a quarter percentage point, or 25 basis points. That would take it down to a target range of 4.25%-4.5%.

Even with the high level of market anticipation, it could be a decision that comes under an unusual level of scrutiny. A CNBC survey found that while 93% of respondents said they expect a cut, only 63% said it is the right thing to do.

“I’d be inclined to say ‘no cut,'” former Kansas City Fed President Esther George said Tuesday during a CNBC “Squawk Box” interview. “Let’s wait and see how the data comes in. Twenty-five basis points usually doesn’t make or break where we are, but I do think it is a time to signal to markets and to the public that they have not taken their eye off the ball of inflation.”

Former Kansas City Fed Pres. Esther George: I would not cut rates this week

Inflation indeed remains a nettlesome problem for policymakers.

While the annual rate has come down substantially from its 40-year peak in mid-2022, it has been mired around the 2.5%-3% range for much of 2024. The Fed targets inflation at 2%.

The Commerce Department is expected to report Friday that the personal consumption expenditures price index, the Fed’s preferred inflation gauge, ticked higher in November to 2.5%, or 2.9% on the core reading that excludes food and energy.

Justifying a rate cut in that environment will require some deft communication from Chair Jerome Powell and the committee. Former Boston Fed President Eric Rosengren also recently told CNBC that he would not cut at this meeting.

“They’re very clear about what their target is, and as we’re watching inflation data come in, we’re seeing that it’s not continuing to decelerate in the same manner that it had earlier,” George said. “So that, I think, is a reason to be cautious and to really think about how much of this easing of policy is required to keep the economy on track.”

Fed officials who have spoken in favor of cutting say that policy doesn’t need to be as restrictive in the current environment and they don’t want to risk damaging the labor market.

Chance of a ‘hawkish cut’

If the Fed follows through on the cut, it will mark a full percentage point lopped off the federal funds rate since September.

While that’s a considerable amount of easing in a short period of time, Fed officials have tools at their disposal to let the markets know that future cuts won’t come so easily.

One of those tools is the dot-plot matrix of individual members’ expectations for rates over the next few years. That will be updated Wednesday along with the rest of the Summary of Economic Projections that will include informal outlooks for inflation, unemployment and gross domestic product.

Another is the use of guidance in the post-meeting statement to indicate where the committee sees policy headed. Finally, Powell can use his news conference to provide further clues.

It’s the Powell parley with the media that markets will be watching most closely, followed by the dot plot. Powell recently said the Fed “can afford to be a little more cautious” about how quickly it eases amid what he characterized as a “strong” economy.

“We’ll see them leaning into the direction of travel, to begin the process of moving up their inflation forecast,” said Vincent Reinhardt, BNY Mellon chief economist and former director of the Division of Monetary Affairs at the Fed, where he served 24 years. “The dots [will] drift up a little bit, and [there will be] a big preoccupation at the press conference with the idea of skipping meetings. So it’ll turn out to be a hawkish cut in that regard.”

What about Trump?

Powell is almost certain to be asked about how policy might position in regard to fiscal policy under President-elect Donald Trump.

Thus far, the chair and his colleagues have brushed aside questions about the impact Trump’s initiatives could have on monetary policy, citing uncertainty over what is just talk now and what will become reality later. Some economists think the incoming president’s plans for aggressive tariffs, tax cuts and mass deportations could aggravate inflation even more.

“Obviously the Fed’s in a bind,” Reinhart said. “We used to call it the trapeze artist problem. If you’re a trapeze artist, you don’t leave your platform to swing out until you’re sure your partner is swung out. For the central bank, they can’t really change their forecast in response to what they believe will happen in the political economy until they’re pretty sure there’ll be those changes in the political economy.”

“A big preoccupation at the press conference is going to the idea of skipping meetings,” he added. “So it’ll turn out to be, I think, a hawkish easing in that regard. As [Trump’s] policies are actually put in place, then they may move the forecast by more.”

Other actions on tap

Most Wall Street forecasters see Fed officials raising their expectations for inflation and reducing the expectations for rate cuts in 2025.

When the dot plot was last updated in September, officials indicated the equivalent of four quarter-point cuts next year. Markets already have lowered their own expectations for easing, with an expected path of two cuts in 2025 following the move this week, according to the CME Group’s FedWatch measure.

The outlook also is for the Fed to skip the January meeting. Wall Street is expecting little to no change in the post-meeting statement.

Officials also are likely to raise their estimate for the “neutral” rate of interest that neither boosts nor restricts growth. That level had been around 2.5% for years — a 2% inflation rate plus 0.5% at the “natural” level of interest — but has crept up in recent months and could cross 3% at this week’s update.

Finally, the committee may adjust the interest it pays on its overnight repo operations by 0.05 percentage point in response to the fed funds rate drifting to near the bottom of its target range. The “ON RPP” rate acts as a floor for the funds rate and is currently at 4.55% while the effective funds rate is 4.58%. Minutes from the November FOMC meeting indicated officials were considering a “technical adjustment” to the rate.

Expect a 'hawkish cut' from the Fed this week, says BofA's Mark Cabana

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Economics

Iran faces dual crisis amid currency drop and loss of major regional ally

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A briefcase filled with Iranian rial banknotes sits on display at a currency exchange market on Ferdowsi street in Tehran, Iran, on Saturday, Jan. 6, 2018.

Ali Mohammadi | Bloomberg | Getty Images

Iran is confronting its worst set of crises in years, facing a spiraling economy along with a series of unprecedented geopolitical and military blows to its power in the Middle East.

Over the weekend, Iran’s currency, the rial, hit a record low of 756,000 to the dollar, according to Reuters. Since September, the embattled currency has suffered the ripple effects of devastating hits to Iran’s proxies, including Lebanon’s Hezbollah and Palestinian militant group Hamas, as well as the November election of Donald Trump to the U.S. presidency.

With the fall of Syrian President Bashar al-Assad amid a shock offensive by rebel groups, Tehran lost its most important ally in the Middle East. Assad, who is accused of war crimes against his own people, fled to Russia and left a highly fractured country behind him.

“The fall of Assad has existential implications for the Islamic Republic,” Behnam ben Taleblu, a senior fellow at the Foundation for Defense of Democracies in Washington, told CNBC. “Lest we forget, the regime ahs spent well over a decade in treasure, blood, and reputation to save a regime which ultimately folded in less than two weeks.”

The currency’s fall exposes the extent of the hardship faced by ordinary Iranians, who struggle to afford everyday goods and suffer high inflation and unemployment after years of heavy Western sanctions compounded by domestic corruption and economic mismanagement.

Trump has pledged to take a hard line on Iran and will be re-entering the White House roughly six years after unilaterally pulling the U.S. out of the Iranian nuclear deal and re-imposing sweeping sanctions on the country.

Iranian President Masoud Pezeshkian has expressed his government’s willingness to negotiate and revive the deal, officially known as the Joint Comprehensive Plan of Action, which lifted some sanctions on Iran in exchange for curbs to its nuclear program. But the attempted outreach comes at a time when the International Atomic Energy Agency says Tehran is enriching uranium at record levels, reaching 60% purity — a short technical step from the weapons-grade purity level of 90%.

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