Explaining Southern California's economy

Even if we can reduce unemployment, we'll still struggle with African-American joblessness

Brian Watt and Madeleine Brand reported today on the final stop of the Congressional Black Caucus' jobs tour, which took place in Los Angeles. As they point out, the unemployment rate among African-Americans is around 16 percent, far higher than the national rate of 9.1 percent. In California, the rate for African-Americans is over 20 percent, while the overall rate is 12 percent.

If you think about this, we really have two problems rolled up into one: in California, we urgently need to reduce high general unemployment; but we also need to address the the problem of black unemployment, which is always higher than the general level. This is from the Economic Policy Institute -- in January of 2008, almost a year before the financial crisis hit:

In the best of times, many African American communities are forced to tolerate levels of unemployment unseen in most white communities. The 2001 recession pushed the white annual unemployment rate up from a low of 3.5% in 2000 to a high of 5.2% in 2003. During the same period, the black unemployment rate shot up from 7.6% to 10.8%. National recessions take African Americans from a bad situation to a worse one....In 2007, the black unemployment rate was 8.3%. This figure is still above the pre-recession low and more than twice the white unemployment rate. Goldman Sachs estimates that a new recession would increase the national unemployment rate to 6.4% by 2009. For African Americans, the unemployment rate would be expected to rise to 11.0%.

Well, it looks as if Goldman Sachs underestimated the impact of the recession we got! The point remains, however, that the African-American community is always unemployed at a level that would be economically intolerable when conditions are "normal." So let's say U.S. unemployment drops back to 5-6 percent. The African-American rate would still be alarmingly high, anywhere from 10-12 percent. And that's assuming it reverts along with the national rate. It could always remain even higher!

At a strictly economic level, what this means is that the U.S. is failing miserably at creating conditions for African-American to achieve full-employment, which the Fed historically targets at 4 percent for the entire U.S. workforce. But it was failing miserably for years before the financial crisis. In 2008, the Center for American Progress summed it all up, in grim statistical detail: in the 1990s, the situation was getting slowly better — then the 2000s arrived and negative trends reasserted themselves, culminating in the jobs Armageddon that has been the Great Recession.

Is this all suddenly going to reverse? It's unlikely. A nice, conservative forecast from American Century Investments puts U.S. growth at only 1-3 percent. Goldman's going with 2-2.5 percent for 2012. This isn't enough to reduce the national unemployment rate at anything resembling a brisk pace. So for African-Americans, the lost decade of the 2000s was just a setup for an even more lost decade in 2010s. 

Chart: BLS

 

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