The Reason Why Black Unemployment Will Continue to Rise

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Black unemployment

Chart showing Black unemployment

The Black unemployment rate and the slowing of U.S. economic growth are linked. The Commerce Department reported recently the U.S. economy grew at an annual rate of just 1.5 percent from April through June, as the consumer cut back on spending. The linkage between Black unemployment and the economy has to do with the rate of growth of the economy. The economy needs to grow at a pace greater than two per cent to have any affect on the national unemployment rate which stands now at 8.2%.

The Black unemployment rate stands currently at 14.4%. Blacks usually bare the burden of any increase in unemployment, as they are usually the first laid off as the economy sours and turns downward and are the last recalled as the economy turns upward. This to some extent is reflected in the current unemployment rate figures for June. The rate of unemployment for White males stood at 7.0% while Black male unemployment for June was 14.2%.

To understand the U.S. economy and what drives it, you have to look under the hood and identify the major components of its engine. Those components are consumer spending, government spending and exports. Of these three major components, the consumer is the most important, as the consumer represents approximately 70% of the economic activity of this economy. What does that mean? It means we are a consumer driven economy and not an export economy, like China, which depends primarily on shipping goods to other countries.

We also are not an economy which survives on government spending. These two components, government spending and exports make up in part the 30%. While government spending and income from exports are important, it is the consumer who is the primary driver of this economy. Think of it this way, the fuel used in your car is gasoline and ethanol. The gas comprises about 90% of the mixture. Take away the gasoline and the car does not move. Your car is not designed to just run on ethanol. That is the way the American economy works, also. If you reduce the amount the consumer spends in this economy, the economic engine of this economy stalls. This is exactly what happened, the Commerce Department report also showed consumer spending slowed to an annualized rate of 1.5 percent from April through June, down from 2.4 percent in the first three months of the year. The rise in automobile sales slowed along with other goods. Why did the consumer reduce spending? You can speculate that people with jobs have become in general more cautious as they see the unemployment rate rise.

What is the answer? Well, the simple short answer is find a legitimate way to put a serious amount of money in the consumer’s pocket on a national basis so the consumer can start spending again. Mr. Obama attempted to do it through his Tax Holiday proposal. Remember when he was crisscrossing the country saying if his Tax Holiday legislation wasn’t passed, it would represent an increase in taxes on the middle class?

Therefore, here we are staring another possible increase in Black unemployment in the face. Mr. Romney’s proposals are no better. He wants to give additional tax breaks to the very wealthy and reduce regulations on businesses. We only need to look around to see how that is going to work. We are already experiencing that type of economy as the rich percentage of wealth has outstripped the middle class exponentially by most measurements. They already have the money. Where are the jobs?

Blacks may want to bury their head in the proverbial sand ignoring these new numbers from the Commerce Department; however, it will be a mistake. What politicians do and don’t do in Washington affect our lives. We have to get involve and get involved now. We must not let Mr. Obama run away from the truth of our situation and demand that he put a national job creation plan on the table. Based on these new numbers, it looks like things are only going to get worst for us, as we are first in line to feel the pain.

By; James Davis

 

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