Economic Perspectives with Hopeton Hay on KAZI 88.7 FM in Austin, TX

African American Unemployment Grows Faster During Major Recessions

December 16, 2008

NOTE: For the latest post on African American unemployment click the following link:  African American Unemployment Rates in February & March Highest Since 1993, Overall Unemployment Rises to Highest Since 1983

By Hopeton Hay

A review of unemployment data from the U.S. Bureau of Labor and Statistics during the last two major recessions reveals that African American unemployment increased 5 to 6 percentage points by the time the recession ended, steeper increases than the unemployment for the entire nation. If the current recession continues African American Unemployment could reach levels not seen since the mid 1980s.

Since 1973 the U.S. has experienced six recessions including our current one which began in December 2007.  Of those six, three have lasted 8 months or less. Three recessions have lasted longer: the 1973-1975 recession (16 months), the 1981-1982 recession(16 months), and the current recession (12 months and counting). These are the recessions I classify as major recessions.

Current Recession

As has been amply reported in the media, the subprime mortgage crisis is the primary cause of our current recession. Since the current recession began in December, the number of unemployed African Americans has increased by 415,000 from 1,577,000 to 1, 992,000. The unemployment rate has grown 2.2 percentage points from9.0% in December 2007 to 11.2% in November 2008 according to the latest statistics from the U.S. Bureau of Labor and Statistics. Overall U.S. unemployment has increased from 5% to 6.7%, an increase of 1.7 percentages points.

1981 – 1982 Recession

The inflation fighting efforts of the Federal Reserve System under chairman Paul Volcker helped drive the US into recession in July of 1981. Volcker raised interest rates from 11% in 1979 to 20% in June 1981. During the July 1981 – November 1982 recession, African American unemployment rose from 15.0% to 20.2%, a 5.2 percentage point increase. Overall U.S. unemployment increased from7.2% to 10.8%, a 3.6 percentage point increase.

1973 – 1975 Recession

In the early 1970’s, dramatic increases in oil prices and the general wage and price controls implemented by the Nixon Administration helped drive the U.S. into a recession in November of 1973. African American unemployment was 9.3% at that point. By the time the recession ended in March of 1975, African American unemployment was sitting at 15.3%, a rise of 6 percentage points. During the same time period, overall U.S. unemployment rose from 4.8% to 8.6%, a 3.8 percentage points increase.

Charting African American Unemployment

The graph below charts the African American unemployment rate for the first 12 months of our three major recessions. As seen below, the unemployment rate for the past 12 months more closely mirrors the 1973-1975 recession, than the 1981-1982 recession. Both recession started with African American unemployment around the 9 percent range and had climbed to the 11 percent range by the 12 month. The last point on the graph below represents the unemployment rate during the last month of the previous two recessions. If the current recession continues to follow the same path as the 1973-1975 recession, we could end up with 15 percent unemployment in the African American community by March 2009.

If you would like to receive email notifications of new articles and commentaries email hopeton@econpers.com.

blackunemployment

Source: U.S. Bureau of Labor and Statistics, National Bureau of Economic Research


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One Response to “African American Unemployment Grows Faster During Major Recessions”

  1. Loved the article! Few things.

    1. Can you send the graph in it’s original format? It was hard to read on the blog. I could make it out; I just wanted a clean copy.

    2. I do agree that the numbers are more similar to the 70’s recession. However, it should be noted that the US economy is much different economy than the 70’s version. In a nutshell, I would envision an overall less acute recession in terms of job losses for African-Americans and the economy overall.

    The main reasons:

    – Inflation is not an issue. This will make it easier for investors, who are concerned about after-inflation return, to re-enter/stay in the market once the financial situation settles down.

    – Globalization. Ultimately even with our issues, the U.S. is still the safest place for entities to invest. There will at some point be a return to the U.S. market by foreign money, as some ‘bargains’ can now be found in the U.S. that were not there before.

    – For African-Americans I think the experience will be varied. For individuals with a lot of human capital, i.e. education and/or experience, they will on average fare much better. I would like to see the unemployment rate broken down by different subsets of the population. I think the story that emerges from that analysis is just as important as African-American overall.

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