Where the economy stands for Black Americans
It has been 96 months since then Senator Barack Obama of Illinois gave the commencement address for the Class of 2005 at Knox College in Galesburg, IL, a speech that focused on the economy.
Yesterday, he returned as a second-term president to kick off his economic recovery tour in the city of 32,000 residents also known for being a stop on the Underground Railroad.
In the eight years since his June 4, 2005 speech, the nation has endured the Great Recession, which was sparked by a financial and housing crisis. So just how much progress has been made is the areas of jobs, housing and the average American’s net worth?
Has the Obama Administration been successful in helping all Americans get back on their feet after one of the worst economic times in our history? Are African-Americans better or worse off now than when the president took office?
Here are how key components of the economy have changed since that speech in 2005, and what these changes mean — particularly for the black community.
Has the American Dream been deferred?
Home ownership is considered the ultimate American Dream for many.
In 2004, black homeownership peaked at 49.1 percent and has been on the decline since. Overall home ownership was 69 percent that year.
During the first quarter of 2013, black home ownership stood at 43.1 percent compared to 65.2 percent overall, according to the Census Bureau.
“The height of home ownership rates in the U.S. as a whole was in 2004, not 2007 or 2008,” Susan Wachter, a real estate and finance professor at The Wharton School at the University of Pennsylvania, explains. “The fact is this is a leverage crisis by existing home owners and investors, and not a crisis due to expanding home ownership opportunity.”
Mortgage loan modification programs launched during the first Obama term, such as the Home Affordable Modification Program and the Home Affordable Refinance Program, also known as HAMP and HARP, have helped to calm the foreclosure waves that swept the country. “We have had about 7 million foreclosures, far too many, but we could have doubled that. HAMP and HARP have been instrumental,” says Wachter.
Jobs, jobs, jobs
“Tumultuous” is the how Bill Rodgers, a professor at Rutgers University and former chief economist at the Labor Department, describes the labor market over the past eight years. “When the recession started it was almost a perfect storm. Household debt at an all-time high, wages stagnating.”
African-Americans were unfortunately positioned to bear the brunt of the recession and slow recovery, especially black men, Rodgers explains. “African-American men continue to be at lower parts of the jobs ladder because of education, experience and where they live.”
In June 2005, black unemployment stood at 10.2 percent, much higher than the national rate of 5 percent at the time. Today, the jobless rate for blacks is 13.7 percent compared to the 7.6 percent overall unemployment rate, based on Labor Department data.
The consistent double-digit unemployment rate for African-Americans has sparked criticism that President Obama has not done enough to create jobs since the Great Recession ended in 2009.
Paths towards increasing black employment
Although the labor market is improving, Rodgers emphasizes that the economy is not creating enough jobs to lower the unemployment rate among African-Americans. “We need north of 220,000 to 250,000 [jobs] before we see improvement in black unemployment.”
Rodgers cites three things holding back the jobs recovery: weak aggregate demand, corporations moving jobs abroad and cuts to public sector jobs.
Sequestration cuts to programs such as Head Start and continued job losses in state and local government both slow the economic recovery for African-Americans, Rodgers warns.
He urges the Obama Administration and Congress to help businesses find the next catalyst for job creation. “The new economic cylinder that will create jobs — that will have a multiplier effect or spillover effect,” is what is needed to secure enough jobs for blacks, Rodgers says.
Negative changes in blacks’ net worth
The slow economic and jobs recovery has also weighed on net worth. The median household net worth of black households fell to $5,677 in 2009 from $12,124 in 2005, according to the Pew Research Center. White households had a median net worth of $113,149 in 2009, higher by a 20 to 1 ratio.
Rakesh Kochhar, associate director for research at the Pew Research Hispanic Center, who conducted a 2011 study on median net worth based on 2009 federal data, says the wealth gap has changed very little from the 2011 report.
Blacks and Hispanics derive more of their net worth from home equity than whites says Kochhar. “The home price decline was much more significant than the declines in the stock market,” in recent years, he explained.
Kochhar also says black households had more exposure to subprime mortgage loans, reducing African-American wealth significantly when the subprime mortgage crisis led to widespread foreclosures.
Furthermore, the general effects of the recession such as unemployment took a toll on net worth, impacting blacks more.
“Traditionally, minorities experience a more severe effect, straining household budgets. And they make less than average,” he says.
The economic road ahead
As President Obama embarks on his economic recovery tour, a new NBC News/Wall Street Journal poll shows Americans want more to be done for the economy. Sixty-one percent of respondents say the economy is on the wrong track.
The president’s approval rating has dipped to 45 percent, the lowest since the debt ceiling debacle in August 2011. And Congress is not faring any better. Only 12 percent approve of their job performance.
In his speech yesterday, the president said Congress is creating obstacles that are distracting the government from focusing on improving the economy. He called for an end to party politics and a renewed focus on the areas of “manufacturing, education, housing, retirement security and health care,” according to the Associated Press.
“I believe there are members of both parties who understand what’s at stake,” Obama said at Knox College. “But I will not allow gridlock, inaction or willful indifference to get in our way.”
Shartia Brantley is a producer and on-air reporter at CNBC. Follow Shartia on Twitter at@shartiabrantley