Any economic recovery will take awhile to reach Black America, say experts
WASHINGTON (FinalCall.com) – “The world has been through the most severe financial crisis since the Great Depression. The crisis in turn sparked a deep global recession, from which we are only now beginning to emerge,” Federal Reserve chair Ben Bernanke recently told the Federal Reserve Bank during an economic symposium in Kansas City.
But as White America possibly begins to see some light at the end of the economic recession tunnel, the Black community is still in the dark and will remain there for at least several more years, warned several experts.
“I don’t think the first phase of the recovery will help the Black community. Their situation will continue to deteriorate,” predicted Dr. Roderick Harrison, a fellow with the Joint Center for Economic and Political Studies and senior research scientist at Howard University.
He told The Final Call, “Historically Black and Latinos suffered most from job loss and unemployment. Large numbers of discouraged workers aren’t even included in the unemployment numbers. Many people have just given up looking. Blacks and Latinos are the last hired and the first fired. I don’t expect to see any substantial signs of improvement for two years or more.”
This view is shared by Dean Baker, co-director of the Center for Economic and Policy Research who analyzed Congressional Budget Office Data in a report, “CBO Projects More Severe Downturn.” “The CBO now believes that the impact of the recession will be larger and longer lasting than its previous projections showed in January,” he said.
“These latest projections show that the unemployment rate won’t return to previous levels until 2014, more than six years after the collapse of the housing bubble threw the nation into recession.”
The analysis report looks at some of the key implications of data in the new CBO release for unemployment, underemployment, lost output, and lost investment. The data indicate:
– Unemployment in 2010 will average 10.2 percent
– Twelve million people will be underemployed–only able to find part-time work–or unemployed in 2010
– A significant reduction in consumption through 2014
– A cumulative loss of investment through 2014 of $600 billion.
“If the CBO projections prove correct, millions of people will be struggling to pay their health care bills, cover their mortgage or rent payments, and meet other necessary expenses for themselves and their families,” said Mr. Baker.
“This means there is a serious need for discussion of ways to lower unemployment and stimulate growth, even if it means continuing to carry large deficits until the economy begins a full recovery.”
According to the Bureau of Labor Statistics, the official Black unemployment rate is 14.5 percent, which is down from 14.9 in June but still an increase from the beginning of the year when it was 12.6 percent.
“After the 1991 recession it was ’93 or ’94 before we saw a solid recovery,” said Dr. Harrison. “The Black community’s recovery lags two to three years behind at best. It might even be worse this time. Recovery will be slow.”
The recession of 1991 saw Black unemployment at 11.9 percent and as high as 14.7 percent in 1992 before it started to slowly decline and got as low as 9.9 percent in 1994.
For Landra Muhammad, the Do For Self teachings of the Honorable Elijah Muhammad have helped her succeed when others around her were failing. She runs a childcare center, Auntie Landra’s House, in Teaneck, N.J. “I’m thriving in the midst of this recession,” she said. “Others around me have closed. I haven’t lost any students and in fact I have too many students. One of the things I’m doing is educating the students. They don’t leave here until they have a good grasp of reading skills, math, science and history.”
“Another thing we do is pray. We don’t begin our day until we pray. I have Christian and Jehovah’s Witness children and their parents love the fact that we pray. I also offer a lot of different services such as a monthly parents night out and the SOS program where a staff member will come to your home and care for your children when they are sick. I’m completely blessed.”
Dr. Harrison noted, “People are surviving by cutting back, children are moving home, they are doubling up, they are becoming self employed to earn whatever they can outside of formal employment and they are moving from the hardest hit areas such as the Midwest industrial areas to where they hope they can find a job.”
ProPublica, investigative journalists in the public interest, has been tracking the recovery. They found that the stimulus money did little to follow poverty or unemployment around the country.
“Since the economic stimulus bill passed nearly six months ago, the Obama administration has repeatedly pledged that the money would reach middle America, seeping into the communities hardest hit by the recession. But analysis of the most comprehensive list of stimulus spending to date found no relationship between where the money is going and unemployment and poverty,” they wrote.
Stimulus spending is literally all over the map according to ProPublica’s analysis, which examined nearly all the contracts, grants and loans the government has reported awarding. Some battered counties are hauling in large amounts, while others that are just as hard hit have received little.
The Mortgage Bankers Association reported Aug. 20, that serious mortgage delinquencies–those 90 days or more past due or in foreclosure–reached record levels in 2nd Quarter 2009, surpassing the previous record set one quarter earlier.
According to new association statistics, 1 in 12 borrowers is seriously delinquent on their mortgage. By comparison, one year earlier just 1 in 22 borrowers was seriously delinquent, and two years ago only 1 in 40 was.
No loan segment, whether subprime, prime, or FHA, has been immune to the deterioration.Clearly loan servicers are not helping enough troubled borrowers through voluntary loan modification efforts and, as a result, prospects for an improved housing market remain distant.
“While the rate of new foreclosures started was essentially unchanged from last quarter’s record high, there was a major drop in foreclosures on subprime ARM loans. The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase,” said Jay Brinkmann, the bankers association’s chief economist.
On Feb. 18, the Obama administration announced its comprehensive plan to stabilize the U.S. housing market. Two weeks later, the administration published detailed program guidelines and authorized servicers to begin modifications immediately. The government effort provides $75 billion for sustainable mortgage modifications through the Home Affordable Modification Program.
“Unfortunately, the numbers show that too few people behind on their mortgages are being reached.While the number of families receiving help has increased during the past few months, the number of struggling homeowners continues to outweigh mortgage modifications by a wide margin,” said Michael Calhoun, president of the Center for Responsible Lending. “In June this year alone there were 254,000 foreclosure starts, which is more than the total number of modifications made to date under the current program.”
“The same lenders who have received a taxpayer bailout have spent millions of dollars lobbying against a reasonable solution to the foreclosure crisis that would require no tax funding: allowing judges to modify primary mortgages in bankruptcy courts,” he said.
Dr. Harrison said the Black community has been the hardest hit with home foreclosures–and will feel its consequences. “The high foreclosure rates in our community have wiped out value and equity. This will have a long-term impact. People who were doing reasonably well, had equity in their homes and had retirement plans had both wiped out.
“This is certainly the biggest setback in the past 50 years for Black socioeconomic status,” he added.
Tom Porter, the retired dean of African American Studies at Ohio University, said the misery index for Blacks continues to skyrocket. “African Americans disproportionately were affected by subprime loans. Health care in our community has been bad for some time. There isn’t any economic recovery in the Black community unless you’re at Martha’s Vineyard.”
“One reason so little is happening is that the president seems to want to pacify working class Whites instead of saying Blacks have been the hardest hit in the economic recession,” he said.
Unity: A must for Black prosperity and survival (FCN, 0820-2009)
Home foreclosures continue to rise (FCN, 07-31-2009)
Foreclosure Intervention Day in D.C. (FCN, 05-29-2009)