Time to Confront Black Unemployment

Last month, the economy created over 170,000 jobs, but black unemployment increased from 13.4% to 14.3%. With the presidential election over and the economy showing significant signs of growth, it is time now to address the crushing burden of unemployment among blacks.

For blacks, vigorous economic growth will help, but is far from sufficient to address their long-standing unemployment problems.

The economy is finally showing notable signs of growth; 171,000 jobs were added in October, and job growth estimate for the preceding month of September was revised upward by 30%. Over the last five months, the economy has added over 850,000 jobs.

Although the unemployment rate increased from 7.8% to 7.9%, the increase was caused by the labor market expanding by almost 600,000 workers, i.e. workers reentering the labor market. This is a sign of confidence on the part of workers, in the belief that they will find employment.

Furthermore, a broad range of economic indicators are now pointing in the right direction, including GDP, retail sales, productivity, consumer confidence, consumer spending, oil prices, housing starts, durable goods orders and many other factors.

Noticeable among the factors that worsened was the significant increase in black unemployment. On the surface, the large increase in black unemployment was caused by hundreds of thousands reentering the labor market. In fact, blacks made up 70% of the persons who reentered the labor market in search of work.

However, the fact remains that even when the economy begins to grow in a sustained manner, blacks will still endure the brunt of unemployment.

Black unemployment is now a major challenge that the Administration and Congress must confront head-on. Blacks are about twice as likely to be unemployed as are whites, but the most onerous burden is that blacks make up 11.9% of the workforce but constitute over 20% of all unemployed workers.

Some History

As the chart below shows, black unemployment rate reached its post-recession peak in October 2010 when it registered 16.7%. During the same month it was 9.3% for whites. Today, the black unemployment rate is 14.1% and the white unemployment rate is 7.0%.

Two statistics can convincingly illustrate the fact that economic growth does not trickle down to blacks sufficiently. First, December 2007 was the peak in the business cycle prior to the last recession. At that point, the unemployment rate for whites was 4.4%, but the rate for blacks was 9.0%.

Second, the best quarter of economic growth the US economy has experienced in the last decade occurred during the fourth quarter of 2003. GDP grew at 6.7%, but the unemployment rate for blacks was 10.6%.

Other Problems that cannot be solved by Simply Growing the Economy

  • A recent report of the Labor Department (African-American Labor Force in the Recovery, February 29, 2012) show that Black men, employed full time, earned on average $653 per week in 2011, 76.3%of the average salary earned by white men.
  • Black women earn on average $595 per week or 84.6%of the average salary earned by white women.
  •  Blacks remain unemployed longer than Whites or Latinos; 27 weeks on average, compared to 19.7 for Whites and 18.5 for Latinos. Once a worker is unemployed for a prolonged period, it becomes harder to find a new job.
  •  Blacks are more concentrated in government jobs, which have been cut significantly as a result of fiscal austerity measures; 19.3% of blacks hold government jobs, 14.2% of whites and 10.4% of Latinos.
  • Companies often use unemployment duration and credit ratings as ways to screen out job candidates. The longer duration of unemployment means blacks will more likely have lower credit ratings and therefore poorer job prospects.
  •  Job history is important, but the unemployment rate for black teenagers reached a post-recession high of 49.1% in November 2009.
  •  Black educational attainment has been set back by the declining quality of public education in urban areas. Yet the link between greater educational attainment and improved employment outcomes is strong.
  •  Blacks are more likely to live in urban areas that are economically depressed, and have fewer employment opportunities.

The Gazelle Index Staff calls on the White House and Congress to establish a National Commission on Black Employment; similar to what was done to deal with the automobile industry crisis. The problems are multifaceted and a commission could identify the most appropriate policy solutions. Incremental policy changes such as job training programs are nice, but are not likely to make a significant difference.

Clearly, economic growth alone is not sufficient to reduce the disproportionately high rate of unemployment among blacks. In fact, there is no scenario wherein the economy can grow enough to reduce black unemployment to levels experienced by whites.

 It is now time to push the discussion of economic recovery beyond the issues that currently occupy the nation’s attention, such as economic growth and the fiscal cliff. We must now focus on the devastating effects of unemployment among blacks.