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U.S. Latino population would have the world's fifth-largest economy, report finds

The U.S. Latino population is a lucrative demographic group.

In fact, if it was its own country, the U.S. Latino cohort would have the fifth-largest economy in the world, according to the 2022 LDC U.S. Latino GDP Report from the Latino Donor Collaborative.

"It's an incredibly powerful demographic for both institutions and investors to be a part of," Josean Fernandez, director of national accounts at Ariel Investments, told Yahoo Finance Live (video above).

In less than a decade, U.S. Latino GDP has grown by $1 trillion, reaching $2.8 trillion in 2020. Its growth rate has surpassed that of the broader U.S. economy, while the average income for the Latino community over the past decade has increased an average of 4.1% per year compared to 2.1% for non-Latinos.

Latinos leading in most industries

The Hispanic/Latino population has been a driving force for many industries.

Latino-owned businesses generated 2.9 million jobs in 2019. As of 2020, the finance, insurance, and real estate industry made up the largest share of Latino economic activity, according to LDC, generating $459.7 billion.

Faustino, who is currently unemployed, waits after filling out unemployment forms in a bookkeeping shop on July 24, 2020 in Calexico, California. (Photo by Mario Tama/Getty Images)
Faustino, who is currently unemployed, waits after filling out unemployment forms in a bookkeeping shop on July 24, 2020 in Calexico, California. (Photo by Mario Tama/Getty Images)

"At the end of the day, we know very keenly at this junction that investing in diverse managers, investing in diverse perspectives can lead to outperformance," Fernandez said. "And there's certainly value there. And institutions certainly have a role to play here."

There's also a financial argument to be made. A study by the Boston Consulting Group found that companies with a diverse workforce are likely to generate 19% more revenue than before.

"They can invest in emerging managers, whether it be on the public side, whether it be on the private side," Fernandez said. "On the private side, you've seen venture capital firms really start to grow within the emerging managers section, as well as private equity and private credit. There's a tremendous amount of opportunity."

'A powerful economic engine for our country'

The LDC report found that 2020, in particular, was an "exceptional" year for the U.S. Latino population.

"Despite the extraordinary challenges presented by the pandemic, Latino real wage and salary income surged 6.7%," the report stated. "Meanwhile, non-Latino income shrank by 1.1%."

During that same year, U.S. Latinos had a higher labor force participation rate than their non-Latino counterparts.

"Latinos were a critical source of resilience, not just for their own families and communities, but for the U.S. economy as a whole," the LDC report said.

The overall U.S. economy contracted during that time. Yet, real U.S. Latino GDP contracted by just 0.8% compared to a 4.4% contraction for non-Latino GDP. Only China experienced stronger growth than U.S. Latinos in that time span.

"In other words, the increase in the growth and strength of Latino human capital has resulted in a powerful economic engine for our country," Sol Trujillo, founder of LDC, wrote in the report.

Tanya is a data reporter for Yahoo Finance.

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