Gaining economic and financial ground in the black community since COVID-19
|Summary
The unemployment rate in the Black and African American community has historically exceeded the non-Black jobless rate. This gap widened when the economy more or less shut down in spring 2020, but the gap remained below the wides that were reached in the aftermath of the 2008 financial crisis. The gap in the jobless rates has subsequently narrowed again as the economy has rebounded. The Black unemployment rate currently stands at 5.7%, just a bit higher than its all-time low in 2019.
Inflation has shot significantly higher over the past two years, but inflation-adjusted median weekly earnings for Black workers have risen modestly on balance compared to pre-pandemic levels. In contrast, inflation-adjusted median earnings for the total population have declined slightly over the same period.
The labor force participation rate (LFPR) among Black and African American workers has historically been below the overall national rate. The Black LFPR nosedived in spring 2020, but it has subsequently rebounded sharply. Although the Black LFPR has not fully recovered to its pre-pandemic level, it is more or less equivalent to the nationwide rate of 62.3% at present.
If, as we expect, the economy slips into recession this year, then the Black unemployment rate likely will rise. But solid demand for labor in the service sector, where Black and African American workers tend to be concentrated, should provide some offset to job losses in more cyclically sensitive sectors.
Net worth in the Black and African American community is lower than in most other racial and ethnic groups. While lower on an absolute basis, average net worth among Black households has risen more than average net worth among non-Black households since the end of 2019.
The assets of Black and African American households are much less diversified than non-Black households. Federal Reserve data show that real estate and pension entitlements accounted for roughly 70% of Black household assets at the end of 2019. In contrast, the assets of non-Black households were spread more evenly among the six major asset classes.
The higher share of real estate holdings has helped to push up average net worth in the Black and African American community over the past few years. Not only have rising home prices boosted net worth, but the rate of homeownership in the Black and African American community has also risen considerably over the past few years.
On the liability side of household balance sheets, the relatively high exposure of Black households to consumer credit could pose a risk to their financial health should a recession occur. Consumer credit represents 42% of the liabilities of Black households, nearly 20 percentage points more than the share for non-Black households.
These positive developments should be viewed in the context that long-standing disparities between the Black community and the overall population remain. The directional improvement is notable, however, and it points to strengthening economic and financial fundamentals across Black and African American households.
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