Retailers, fashion and home brands might want to stay close to the Latinx customer base.
Census data shows that the population in the U.S. grew by only 7.4 percent between 2010 and 2020, but the number of individuals who identify as Hispanic or Latinx rose by 23 percent. Recent trends suggest Hispanics are likely to exert an even greater influence on growth in the coming decade, according to economists at Wells Fargo Securities, who noted the group’s significantly younger median age of 30, or about 11 years younger than the non-Hispanic population.
The Wells Fargo report from economists Jay H. Bryson, Sarah House, Charlie Dougherty and Nicole Cervi also found that 75 percent of Hispanic adults now have at least a high school education, up from 64 percent in 2010. What’s more, 21 percent attained a bachelor’s degree versus less than 14 percent in 2010. Higher and more advanced education rates are also elevating household income.
“Real median income for Hispanic households rose at an average rate of 2.2 percent per annum between 2010 and 2019, faster than the 1.5 percent rate for the nation as a whole. Median family wealth grew nearly three times faster than the typical U.S. household last decade as well, setting up Hispanics to become an even larger share of spending in the years ahead,” the report said. It also found that the demographic is on pace to drive about 40 percent of growth in the total number of American households over the next 10 years, and play a major role in the U.S. housing market over the same period.
The economists noted that demographers at the U.S. Census Bureau expect Hispanic and Latinx consumers to account for more than half of the overall U.S. population growth for a third straight decade. “These demographic trends have important economic implications. Namely, a country’s potential rate of economic growth is essentially the sum of its labor force growth rate and its underlying rate of productivity growth,” they said, adding that Hispanic Americans are becoming an increasingly influential source of economic growth. This consumer group already accounted for a 91 percent increase in the labor force over the past decade, and their rate of participation had pulled 4.4 points ahead of non-Hispanics.
Growing job experience has translated into a median annual income among Hispanic households of $56,000 in 2019, still off from the nearly $69,000 national average. The economists expect that as the share of Hispanics graduating from college grows, annual household income will rise in tandem.
Why is that important?
The Wells Fargo economics team said data compiled by the Bureau of Labor Statistics for its Consumer Expenditure Survey indicates that direct spending by Hispanic households totaled nearly $1 trillion in 2019. While that represents just 11.8 percent of total direct consumer expenditures for the group, the share climbed from 10.5 percent in 2010. And consumer spending by the group is expected to “outpace” other demographic groups in the decade to come. One reason is that the Hispanic population is younger than average, with consumer outlays tending to increase with age before peaking around ages 45 to 54.
Thus far, data from 2010 to 2019 shows that over a three-year moving average, spending by Hispanics on apparel and services slipped 1 percent, while entertainment rose 20 percent and housing was up 21 percent. Food away from home rose 34 percent and health care was up 93 percent. But as the real median income among Hispanic households continue to close the gap with all American households, the economists believe that Hispanic buying patterns accelerate in the coming years. In 2019, apparel and services spending by Hispanics was about 3 percent, versus the 4 percent rate by all consumer groups.