It's a niche ethic, weaker than other stuff, but not useless. The democractic and oligarchic governments are good enough to justify the use over Collectivist in certain builds.
It's not a niche ethic, it's plain bad right now and in many ways detrimential. Let's compare it to it's closet relative, collectivist step by step.
Xenophobe 50%/100% Xeno Slavery Tolerance | 50%/100% all around slave tolerance
Collectivist
Xenophobe -10/20 on all relations (negative) | -5%/10% food consumption
Collectivist
Xenophobe monument of purity (10 happiness) | -15% divergence building
Collectivist (The former is per planet, the later appears empire wide!)
Xenophobe allows purging | allows purging
Collectivist
Xenophobe has no specific tech | -20% divergence + 25% colony speed
Collectivist
Xenophobe genetical engineering punished | genetical engineer away
Collectivist
Look, this is just a short summary, xenophobe has NOTHING positive going to it which collectivist doesn't do BETTER. Worse without the massive divergence reduction collectivist comes with your pops are likely to lose their xenophobia very quickly. Which means you keep the negative aspects such as lowered relationships while ALSO seeing your pops upset about enslaved aliens.
No this isn't making the case about Collectivist needing a nerf, it's just that xenophobe right now is an all around terrible ethos. It's few benefits are neglibel, 10% happiness isn't going to do much unless you have other stuff to stack it with to get bonus production going and it has HUGE backdraws. Aside from "RP" there's no reason to take it, ever.