Black Businesses fell behind during Recession and Recovery (7/14/15)

85

The economy is performing well, but the rewards of growth are not evenly spread. As a result, attention is shifting from concern over whether enough jobs are being created to the widening gap between the winners and losers in the recovery. The fight to increase the minimum wage, worry about the growing concentration of income and wealth and declining quality of the average job are all manifestations of this new concern.

It is easy to see how economic growth is leaving the middle and bottom tiers of the labor market further and further behind. Much less visible is the effect it is having on different racial and ethnic segments of the small business sector.

This article focuses on small business revenue growth. It finds that Black-owned businesses fell behind in the recession and are falling further behind in the recovery. Black business revenue grew by only 31% between 2007 and 2013 while average revenue across all race and ethnic groups grew by 95.4%.

Before the recession started in 2007, the average revenue of Black-owned small businesses was $2.5 million, or 62% of the average revenue of small businesses owned by all race and ethnic groups. By 2013, average revenue of Black-owned small businesses was $3.3 million, which was only 42% of the average revenue of all small businesses.

Labor Market Recovery

The recession was cruel. From its start in October 2007 to its peak in October 2009, the unemployment rate increased by 113% – from 4.7% to 10.0%. Worse still, it took the economy four years to return to grow substantially enough to restore the millions of jobs that were lost. Today, the unemployment rate is 5.3%; this is because 245,000 new jobs were created each month over the last year.

Small Business Employment during the Recession

Small businesses were hit hard by the recession. A EuQuant survey of 600 small business owners, conducted in 2011, found Hispanic/Latinos suffered the most. Overall, 55% of their small businesses were forced to cut workers, and 26% cut employment by more than one-half. Black businesses were second hardest hit; 46% cut employment and 24% did so by more than 50%. While 47% of white CEOs decreased employment, only 15% did so by greater than one-half.

Small Business revenue during the Recession and Recovery

To examine small business revenue, EuQuant used the information on 15,336 small businesses registered with the federal government. We tracked the revenue of the same business in 2007, 2010 and 2013.

Whites owned 60.8% of the businesses; Blacks owned 12.1%; Hispanic/Latinos owned 10.6%; Asian and Pacific Americans owned 7.3%; Subcontinent Asians owned 5.0%; and Native Americans owned 4.2%.

The revenue of Black business owners was stagnant during the recession (2007 to 2010). It changed by only 2.1%. In contrast, the revenue of all groups increased by 41.5%. In the recovery (2010 to 2013) Black business revenue increased by 29.2%. This was faster than was the growth of Hispanic/Latinos (14.9%) and Subcontinent Asians (11.7%). However, it was significantly slower than average, 38.1%.

The stagnant growth of Black revenue in the recession, and the below average growth in the recovery, caused Black businesses to fall further behind other race and ethnic groups. Between 2007 and 2013, Black business revenue grew by 31%, but average revenue across all groups grew by 95.4%.

Before the recession in 2007 the revenue of Black-owned businesses was 62% of the revenue of all small businesses. By 2013, it was only 42%.

Average Revenue of Small Businesses by Race and Ethnicity of Ownership

Race and Ethnic Group Average Revenue
Year

2007

2010

2013

Asian Pacific Americans $4,373,758 $5,227,558 $9,922,621
Black Americans $2,505,023 $2,556,882 $3,303,469
Hispanic Americans $3,009,107 $4,589,902 $5,272,657
Native Americans $4,083,227 $6,009,895 $7,712,186
Subcontinent Asian Americans $4,113,048 $5,603,941 $6,262,178
Non-Minority Owners $4,491,779 $6,596,678 $9,107,309
Overall Average $4,020,410 $5,689,658 $7,857,231

Note: The results track the revenue of the same 15,336 businesses in each year.

 

Change in Average Revenue of Small Businesses by Race and Ethnicity of Ownership

Race and Ethnic Group

Change in Average Revenue
2007 – 2010 2010-2013 2007 – 2013
Asian Pacific Americans 19.5% 89.8% 126.9%
Black Americans 2.1% 29.2% 31.9%
Hispanic Americans 52.5% 14.9% 75.2%
Native Americans 47.2% 28.3% 88.9%
Subcontinent Asian Americans 36.2% 11.7% 52.3%
Non-Minority Owners 46.9% 38.1% 102.8%
Overall Average Change 41.5% 38.1%

95.4%

 

Last modified: June 20, 2017

Comments are closed.