The economic slowdown and the Hispanic market: The Hispanic Consumer Market … PART I

A question I have been hearing more and more lately with all the negative economic news coming out of Wall Street and Washington is what effect this economic slowdown will have on the U.S. Hispanic market. As I’ve thought about this question, I found it useful to understand the key components of the U.S. Hispanic economy. My approach was to look at the Hispanic market from 3 different lenses – 1) Hispanic consumer spending, 2) Hispanic advertising, and 3) Hispanic small business. I’ll start with the Hispanic consumer market today:

Hispanic consumer spending

The Hispanic consumer market represents the collective buying power of 45.5 million people, or roughly 15.1% of the entire U.S. population (Source: U.S. Census, 2008). Most people who follow the Hispanic market will tell you that the 45.5 million figure is conservative, and fails to capture the 12-20 million undocumented Hispanics in the U.S. Bottomline, this is a big chunk of this U.S. consumer market.

There have been a lot of stories pointing to the fact that the Hispanic market has been hit harder than the general market by the sub-prime housing situation, evidenced by the massive foreclosures and strong drop in home values in western states like California and Nevada and the real estate free-fall in South Florida, which all represent significant Hispanic population centers. Add to this trend the fact that a lot of housing-related industries, such as construction, which employ a lot of low-skilled labor, have been particularly hard hit. There are even some reports that immigration from Latin America has slowed in the last year.

However, on the brightside, there is a historical trend for the Hispanic market to fair better in recessions than the general market. During the last recession (2001-2003), the Hispanic market was generally felt to have faired well. Hispanic households also historically show lower unemployment rates during recessions. Hispanic households are also larger, on average, and younger (1/3 of the Hispanic population is under 18). This means more kids and teens, segments that drive spending under all economic conditions. Another trend that we’re seeing is a dispersing of the Hispanic population from traditional population centers in the Southwest to other parts of the country, as construction jobs in these area have dried up, recent immigrants have moved to other parts of the country, including the South and the Midwest. Add to this the fact that even with a reduction in immigration flow, the Pew Hispanic center is still estimating 225,000 new immigrants from Mexico and Central America this year alone.

All in all, while the sinking housing market and housing-related jobs market will put negative pressures on Hispanic spending, it will be more than outweighed by fundamentals such as continued immigration, population dispersion, and younger/larger households. My view is that Hispanic consumer spending will remain relatively stable and continue to grow, albeit more slowly, even as the rest of the country sees consumer spending dip in 2008 and 2009.

By Jose Villa.

Jose Villa is CEO and founder of Sensis http://www.sensisagency.com ranked the fastest growing Hispanic company in California and an Inc. 500 fastest growing company in 2008. Sensis is a digital advertising agency helping its client reach diverse audiences using both traditional and new media. Sensis clients include the U.S. Army, Sempra Energy, L.A. Care Health Plan, and Impremedia.