The Rising Economy Tide is Lifting all Boats, Except Black Businesses

Most key economic indicators are positive. Although the Labor Department’s January Jobs Report did not show stellar job growth during the month of December, the economy nevertheless produced 156,000 new jobs and wages increased by the most in eight years. The unemployment rate remained virtually unchanged, edging up only slightly from 4.6% to 4.7%. Indeed, the rising economic tide appears to be lifting all boats with one notable exception – Black-owned businesses.

Alongside solid news on the economic front, the stock market continues to break record barriers, with the Dow threatening to reach the 20,000 benchmark. News analysts mistakenly attribute this robust economic performance to the election of the new President. In point of fact, the solid foundation for economic growth is a function of developments put in place by the Obama Administration.

However, the stock market is a different matter. It is not so much responding to fundamental economic development but rather, irrational expectations. Specifically, the prevailing assumption is that the new President will deliver a “free lunch” to all constituencies.
One of the most fundamental lessons learned in Economics 101 is, “there is no such thing as a free lunch.” It is unlikely that the new administration will be able to spend $1 trillion on infrastructure, cut taxes by the largest amount ever, eliminate Obama care while maintaining health care coverage for the population, and erect trade barriers against China and Mexico while keeping domestic commodity prices competitive for US consumers. That, however, is material for another post.

Since 2007 EuQuant has tracked the yearly progress of 15,000 small businesses. Asian and Pacific Americans own about 7% of those businesses, 12% owned by Black Americans, 11% owned by Hispanic Americans, 5% owned by Native Americans, 5% owned by Subcontinent Asian Americans, and about 62% owned by whites.
The latest full report covers data through 2013. The sample of businesses included those with at least one full-time employee and a minimum revenue of $10,000. However, the average revenue of the businesses was just under $5 million in 2007 and $8.3 million in 2013.

The results (illustrated in the figure below) indicate the revenue growth for all businesses was 70% between 2007 and 2013. Businesses owned by Asian and Pacific Americans experienced the greatest increase in revenue, from $5 million to just over $10 million or 108%. For whites, revenue increased by 79%. Overall, there was a significant revenue increase for all race and ethnic groups, except Blacks. Average revenue for Black business owners decreased over the six-year period from $3.6 million to $3.4 million, or by 7%.
The results confirm the conclusion that Black business owners are not participating in the rising economic fortunes of the country. Indeed, their progress is moving in the opposite direction.

AVERAGE REVENUE BY RACE FOR THE SAME FIRMS, 2007, 2010 AND 2013

(Revenue Adjusted for Inflation)

		2007	2010	2013	Percent Change, 2007 to 2013
		Mean	Mean	Mean
	Asian Pacific Americans	$5,039,005	$6,177,521	$10,496,243	108%
	Black Americans	$3,624,856	$3,539,349	$3,388,260	-7%
	Hispanic Americans	$4,000,080	$6,077,789	$5,760,395	44%
	Native Americans	$5,569,092	$9,556,334	$10,226,632	84%
	Subcontinent Asian Americans	$3,934,477	$5,508,722	$6,467,636	64%
	Non-Minority Owners	$5,290,077	$6,976,576	$9,449,279	79%
	Total	$4,887,691	$6,455,460	$8,291,379	70%
Source: EuQuant compilation of US SBA data.