The Economic State of Black America

Weather is perhaps the most appropriate metaphor for the economic state of black America. When it is cold in the overall economy, black America finds itself freezing. And when the overall economy experiences a sunny day, somehow black folks are located under a cloud.

This was certainly true during the Clinton years, when economic expansion was the name of the game. Black folks didn’t see expansion or wage increases until the tail end of that administration, and those gains were quickly wiped out in early 2001.

Now, President George W. Bush and Federal Reserve Board Chairman Alan Greenspan have been dancing in the streets with the thought of economic recovery. The macroeconomic numbers look good, too. They reflect high growth rates and more domestic investment, which lead to macroeconomic ecstasy.

But there is a microeconomic angst that comes from the fact that the job market has not been expanding at a reasonable rate. Indeed, in some areas it seems that the job market is contracting, with people dropping out of the labor force because they can’t find jobs.

According to the Bureau of Labor Statistics, a mere 1,000 jobs were created in December 2003. That represents 20 jobs per state, so few jobs that a researcher could entertain all the new jobholders without going broke.

What’s up with the jobs market? The most recent data reports that the overall unemployment rate is 5.7 percent, while the black unemployment rate is 10.3 percent, twice the white rate of 5 percent.

Most analysts describe the unemployment rate as a "lagging indicator," which means that it follows economic good news by a few months. But good economic news has been reported for at least the past six months, and employment has not expanded concomitantly.

The prospect of a jobless economic recovery has special implications for blacks.

It is not likely that the unemployment rate will drop substantially this year, which means that blacks are likely to continue to experience high unemployment. Because most black households are supported by wages, not investment income, the job market is one of the most critical issues for black Americans.

On Labor Day 2003, President Bush acknowledged the employment problem and said that he would appoint an Assistant Secretary of Commerce for employment to tackle the issue.

What about the Labor Department? And what irony that the president would appoint a (probably) white male bureaucrat to solve employment issues that hit the black community hardest.

Besides employment issues, the economic situation for blacks is influenced by our low level of wealth accumulation, which is best illustrated in the homeownership gap. More than 70 percent of whites own their homes, compared to 47 percent of blacks. The homeownership gap is partly a function of lending discrimination, and partly a function of disparate incomes. While black incomes grew faster than white incomes in the latter part of the 20th century, blacks lost income at a more rapid rate in 2001 and 2002.

The income loss issue is important because blacks are more likely than whites to incur debt and because blacks have fewer instruments than whites through which to carry debt.

In other words, while whites can access low-interest home-equity loans, blacks are more likely to incur higher credit card or finance company loans. In the short run, these loans may alleviate economic distress. In the long run, these loans can lead to financial disaster. Financial literacy initiatives that target the black community are important ways to ensure that people make informed choices about credit and debt.

Further, the issue of entrepreneurship is important to black economic advancement. The Bush Administration is not likely to accelerate its attacks on affirmative action and minority contracting during this election year, but there are market forces that may well undermine black entrepreneurial advancement.

Many folks have insisted on pitting the black community against the growing Hispanic community, with the result being that some black minority suppliers are feeling the pinch of competition. Instead of competing for scarce "minority" dollars, blacks and Hispanics must collaborate to increase their share of corporate spending.

It is important to note that the black community is relatively bifurcated, so that while most folks are experiencing economic challenges, some are thriving in this economy. Professionals, investors and successful entrepreneurs are doing better than most black folks are, and race matters are not a factor for an increasing number (perhaps as many as 20 percent of the population) of black folks.

Pollsters are divided on which issue is more compelling this year — the war on Iraq or the economy. Yet the two are intertwined. Spending $180 billion in Iraq crowds out domestic spending, and a disproportionate number of blacks, employed in government and services, will be crowded out of their jobs. At the same time, a faltering economy has a strong negative impact on blacks, especially in the jobs market.

In sum, there are no reasons to expect that the economic situation of black Americans will change in 2004. Indeed, it is likely that the status of blacks will worsen, unless targeted initiatives to close gaps are undertaken. So if it is cold in America, black folks are freezing, and if it is sunny, we’re operating under a cloud.

The economic status of blacks will only improve when we focus on economic status as a priority.