June 9, 2020

Coronavirus Obliterated Best African-American Job Market on Record

[The Wall Street Journal]

The economic situation for black workers was fragile even before the downturn, which means recovery might be slower

Near the end of a decadelong economic expansion, African-Americans were finally finding some financial stability. Unemployment had reached record lows, and their wages had begun rising modestly.

Anthony Steward, 34, a Milwaukee cook, personified that progress. In 2018, he said, he left his $10.50-an-hour corporate-cafeteria job for one paying $15 at Fiserv Forum, home of basketball’s Milwaukee Bucks, serving steaks, chicken wings and eggplant mozzarella for luxury-box guests.

He loved it. Mr. Steward said he cooked for Hall of Famer Kareem Abdul-Jabbar and rapper Ja Rule and was due for a union-negotiated raise to $16.50 this summer.

The coronavirus pandemic and shutdown brought all of that—one of the most promising economies in recent memory for African-Americans—to a crushing end.

In March, Mr. Steward was laid off after the National Basketball Association suspended its season due to Covid-19. Late last month, he became ill and was subsequently diagnosed with the disease, he said. Then he saw the pharmacy and restaurants in his Lincoln Creek neighborhood looted and vandalized following protests sparked by the killing of George Floyd.

“It was like everything was falling into place, and now it’s all paused,” Mr. Steward said. He doesn’t know if he will return to his old job, because it is unclear when the NBA will allow fans to return to arenas. He wants to work once he’s recovered—he is concerned about health-care bills, because he has no insurance—but suspects he’ll have to take a pay cut because many in the food-service industry are unemployed.Anthony Steward lost his cook's job after the NBA suspended the season.

Anthony Steward lost his cook’s job after the NBA suspended the season. PHOTO: ANTHONY STEWARD

“It will be a struggle to provide for your family,” he said, “especially in the black community.” The Bucks referred to the team’s previous statement that the team and players established a relief fund to assist part-time employees like Mr. Steward.

The black unemployment rate, which at 5.8% in February was near the lowest since records began in 1972, tripled to 16.8% in May, according to the Labor Department.

Even when unemployment was low, African-Americans’ overall economic situation was fragile. As a group, they had less job security and wealth than whites, leaving them especially vulnerable when the economy shut down. That now weighs on their prospects as the steepest economic contraction since the 1930s shows signs of turning. Historically, African-Americans’ recovery from recessions has been much slower than those of other groups.

The disease itself also hit African-Americans harder, medically and financially, in part because of longstanding inequities such as a lack of access to medical care and disproportionate representation in less secure low-wage jobs, said Bradley Hardy, an economist at American University. “These protests are also a response to broader insecurity in these communities,” he said.

“You don’t feel secure with law enforcement,” said Mr. Hardy, “you don’t feel secure in your housing, with your health, or with employment.”

This slump has defied precedent in so many ways, it is too early to conclude African-Americans’ recovery will follow previous patterns. And some experts see the protests as an opportunity to make fundamental changes.

“It’s a mistake to disconnect the social from the economic,” said Andre Perry, a scholar at the Brookings Institution. “Criminal-justice reform can lead to economic justice. The more we become aware of how we’re devaluing black lives, the more that education will unearth how we’re choking out people in economic policy.”

Wage lag

For most Americans, today’s double-digit unemployment is without modern precedent. But not for African-Americans. Black unemployment topped 10% from September 1974 through November 1994 and again from July 2008 through February 2015. Its peak in the last recession, at 16.8%, equals the level reached in May.

The decline from that high was slow, and black wages persistently lagged behind inflation. But as the expansion lengthened, that began to change. Employers increasingly gave chances to people passed over before, including those with long stretches of unemployment and fewer educational credentials. And with competition for talent so fierce, biases that held back the hiring and promotion of African-American workers carried less weight.

In August 2019, just after the expansion became the longest on record, black unemployment dropped to 5.4%, just 2 percentage points above the rate for white workers—the narrowest gap since data began in 1972.

The killing of George Floyd on May 25 sparked protests over police brutality and systemic racism. WSJ’s Darren Everson spoke with black professionals to discuss their experiences and what changes they’d like to see. Photo illustration: Adele Morgan

Wages, which largely failed to keep pace with inflation early in the economic expansion, began to accelerate in mid-2018. The African-American poverty rate fell below 30% in 2017 and 2018 for the first time on record back to the mid-1970s, according to the U.S. Census Bureau.

In March and April, 3.5 million African-Americans lost their jobs. While black employment rose in May, it did so by less than for whites and Hispanics. The employment gain was also less than the increase in the African-American labor force—those working or actively looking for work. That is why the black unemployment rate rose while others’ fell.

“Job losses due to the pandemic were fairly evenly distributed across racial groups,” said Valerie Wilson, an economist at the left-leaning Economic Policy Institute. “In just one month, you’ve seen the recovery will not be.” She noted that while private-sector employment rose in May, municipal governments and school systems—large employers of African-Americans—cut thousands of jobs.

A faster recovery that returns black employment to pre-pandemic levels is possible. Congress has authorized more than $2 trillion in stimulus such as checks to households, enhanced jobless benefits and the Paycheck Protection Program, loans that are forgiven to employers who retain workers. And more than 80% of those who lost a job recently expect to be recalled within six months, according to the Labor Department.

‘Messed up my world’

Between 2014 and 2017, Lakisha Hubacek of Providence Village, Texas, worked temporary jobs after being laid off from a company where she had worked for seven years. “I worked five months here, six months here,” she said. “That leaves a sense of uneasiness.”‘This has totally messed up my world,’ says Lakisha Hubacek, furloughed in March.

‘This has totally messed up my world,’ says Lakisha Hubacek, furloughed in March. PHOTO: LAKISHA HUBACEK

In 2017, she said, she found a job as an accounts-payable coordinator at Ashford Inc.’s Remington Hotels making $20 an hour. The job gave her a sense of professional stability. “It was a relief,” said Ms. Hubacek, 43. “I thought this was going to be a really great opportunity, and then maybe I could move up.”

She was furloughed in March, as hotel occupancy across the country plummeted, and then laid off in May. “Looking for a job is so difficult right now,” said Ms. Hubacek, who is widowed and has two children. “This has totally messed up my world from the top to the bottom.” Remington declined to comment on Ms. Hubacek, saying that in laying off some workers: “We did not approach these decisions lightly.”

Ms. Hubacek is trying to find a silver lining. She is devoting more time to her e-commerce startup, FallingStar Naturals, which makes and sells skin-care products, including hand sanitizer. She saw sales pick up early in the pandemic. She is hopeful the business will grow while she is between jobs.

“I would rather focus my time on building my business, growing our money, instead of making somebody else rich,” she said. The prospect is risky, she said: “If I fail, I fail alone….I don’t really have anybody to really back me up or save me if something happens.”

Even with historically low unemployment, African-Americans’ financial position wasn’t particularly strong heading into the pandemic. Federal Reserve data shows African-American families’ median net worth was $17,600 in 2016, versus $171,000 for white households.

In the fourth quarter of 2019, 44% of African-Americans owned homes, down 4 percentage points from 2007, just before the last recession, according to the Census Bureau. The white homeownership rate was 74%, down just 1 point. In 95% of majority-black neighborhoods, most small businesses operated with a cash buffer of two weeks or less, compared with roughly 30% of majority-white neighborhoods, according to research from the JPMorgan Chase Institute.

Less cushion

African-Americans have less of a cushion to tide them over if they lose jobs, and those who still have jobs, such as the self-employed, have fewer resources to draw on. Houston lawyer Ashton Taylor, 42, opened his practice in 2011, relying on family to help with the startup costs. Since opening the firm, he said, he hadn’t been able to secure a business line of credit through his bank but had still expanded his client base through professional networking.

“My business was ramping up only because of my relationships,” Mr. Taylor said, “but I still didn’t have access to capital.”

Most of his work involves representing low-income African-American clients, he said. But because of the pandemic, courts have closed and some clients can’t pay their bills, so he is considering pursuing more lucrative clients. “My passion as far as representing people who can’t normally afford attorneys is going to have to go on the back burner, and that makes me kind of sad.”

Antwanye Ford, chief executive at Enlightened Inc., a Washington, D.C., firm offering cybersecurity, management consulting and other business services, said work for roughly 30 of his employees who work as contractors at other firms dried up amid the pandemic, but he has kept them employed through the Paycheck Protection Program.

As the economy reopens, said Mr. Ford, 55, he worries some of his employees, fearing that black-owned businesses are ill-prepared to weather the pandemic, might look for opportunities at larger firms. “Some of the folks don’t want to leave and they have a good job and, I think, a good company. But they have to look out for themselves,” Mr. Ford said. “For black business owners, whether it’s stated or unstated, that’s what the staff is going to feel: ‘Are we OK?’ ”

More than 20,000 African-Americans have died of Covid-19, representing 23% of all deaths, though African-Americans are only 12.5% of the U.S. population, according to the National Center for Health Statistics.

The Centers for Disease Control and Prevention says African-Americans are more likely to live in densely populated cities where transmission is higher, more likely to have underlying health conditions such as high blood pressure and diabetes, and less likely to have health insurance and access to nearby medical care.

African-Americans are also more likely to work in jobs that can’t be done from home, and thus were at heightened risk either of exposure to the virus if the jobs were deemed essential, or of unemployment if they weren’t.

In recent weeks, the daily death rate had dropped and states began to reopen their economies.

Then Mr. Floyd’s killing was captured on video, triggering protests that quickly spread to other cities and familiar frustrations for many African-Americans. “This one hits harder,” Mr. Ford said, “because you saw a person who was a narrator of his own death.”

Persistent economic disparities contributed to the unrest, said Brookings’ Mr. Perry. Brookings analysis shows that in 2018, the median income for black households in the Minneapolis region was $38,200, less than half that of white households at $85,400. There was also a large black-white homeownership gap in the area, and African-Americans were disproportionately stopped by police, the Brookings analysis found.

Such racial disparities had “formed a powder keg that exploded over the past few years,” said Mr. Perry. “The property damage and the wealth losses created by structural racism in housing, education and health care has caused more damage than any riot could possibly cause.”

Ramon Gladney, an African-American barber on Chicago’s South Side, said the pandemic and civil unrest had changed his community and his profession.

He was unemployed for 10 weeks after state officials closed shops like his. He received his first unemployment payment on Wednesday, June 3—the same day his shop was allowed to reopen.

His business and neighborhood look much different from when he closed. Nearby dollar stores where he would run to grab supplies or a drink have been closed after looting. Neighbors are worried the grocery store, which helped drive traffic to his shop, will be permanently closed after sustaining damage.

Mr. Gladney, 40, had to remove chairs in his shop where customers would hang out and chat—new regulations bar people from waiting inside for a trim. Relying mainly on reservations rather than a steady stream of walk-in customers means he’ll earn less. “It’s been mentally draining,” he said of the virus. “I’m hoping there’s not a relapse because I can’t take another financial hit and survive.”

The recent outpouring of protest is generating intense debate about race in America—and ideas. Mr. Ford said he would like to see measures that specifically address African-Americans, given the health, social and economic disparities the pandemic and Mr. Floyd’s killing laid bare. Mr. Ford suggested training black workers in high-demand occupations over the next several months, such as contact tracing.

The current social unrest feels different from other recent instances “because it’s sustaining itself,” he said. But without progress on “the wealth gap, inequities when it comes to salaries and job types and access to capital, then we just had a moment.”

By Eric Morath and Amara Omeokwe

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