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A decade in review.

"In this time of economic turmoil, we need expert analysis and interpretation of events." Sound familiar? It was the charge BLACK ENTERPRISE Publisher Earl G. Graves gave the BLACK ENTERPRISE Board of Economists (BEBE) at its first meeting in February 1982.

Since then, BE's economic griots have analyzed, interepreted and synthesized black economic issues and trends over the last decade. When the board first convened 10 years ago, the nation was inching out of a recession and a bull stock market was in the offing. Is past once again prologue?

This spring, there is good news and bad news. The good news is the recession is over. Unfortunately, many Americans don't believe it. In February, the New York City-based Conference Board reported that its consumer-confidence index had skidded down to 46.3%--the lowest reading since 1974.

No surprise there. Economic indicators were all over the place. On the positive side, mortgage rates were down, while new housing sales, building permits and the index of leading indicators were up. But personal income (which drives consumer spending) was flat and new factory orders (which inspire hiring and produce the price index) were down, reflecting continued weak demand.

Other pins bursting the consumer-confidence balloon were even sharper. Unemployment rose to 7.3% in February, and first-time claims for jobless benefits were still over the 400,000 level. Further complicating the recovery are the following factors: a near 1% drop in industrial production, a 78% factory operating rate and the fourth monthly uptick in unsold business inventories.

With these issues before them, BEBE convened in New York last February. Papers were delivered on: the link between U.S. economic growth and the black community; the outlook for the U.S. economy and black America's economic prospects throughout the recovery. A paper delivered by Dr. Bernard E. Anderson of the Philadelphia-based Anderson Group was used as the basis for the 20-year overview of the BE 100s. (See "A Tale Of Two Decades," in this issue.)

Looking Back To See Ahead

Not surprisingly, the board's most difficult task was to review its work over the past decade. Of the original nine members, only four still serve: Marcus Alexis, Bernard E. Anderson, Andrew F. Brimmer and Earl G. Graves. (See sidebar, "In The Beginning," for biographies on the founding members of the board.)

The meeting's topic moved Graves to reflection. "Despite the longest period of sustained growth since World War II, 1982 concerns continue to dominate black America today. Yes, more black businesses are being formed and more black students are attending college. But we still battle disproportionate unemployment, lack of access to capital and inadequate educational resources. And 10 years ago, no one could have projected the impact of AIDS, crack and increased homelessness."

One of the most persistent problems is black unemployment. In 1982, the late Nobel Laureate Sir W. Arthur Lewis warned fellow board members that "extended joblessness of this magnitude [40% for teenagers] will destroy black American society unless something drastic is done to ease it. The family, everything else will fall apart."

The situation is just as bad today. Last January, U.S. Bureau of Labor Statistics data showed black teenage urban unemployment to be 37.2%, not including part-time workers or those who have stopped looking for jobs.

The problem's seeming intractability bothers current BEBE member Margaret C. Simms, the director of research programs at the Washington, D.C.-based Joint Center for Political and Economic Studies. "It's as though Sir Arthur Lewis could see the future," says Simms. "The problems that often grace the front pages of newspapers and television have been about the destruction of the black community. The increasing rates of crime and violence and the decline in marriage are at least partially related to the lack of viable opportunities in the legitimate economy. The increased poverty of black children is related to poor job opportunities for both their mothers and for their increasingly absent fathers."

Gerald D. Jaynes, professor of economics and Afro-American Studies at Yale University, agrees. "Lewis' prediction was profoundly on target; these problems lead to wider societal ills that will affect the entire population. To solve these problems, [we as] black people will have to look to ourselves in this political climate."

But despite the outcry for change, Simms isn't optimistic about current strategies and efforts. "While some private initiatives have been developed and replicated, they are inadequate for the task that faces us."

If private initiatives can't provide more jobs for blacks, are public attempts more suited? No definite answer is known, but arguments about public versus private ventures underpin several responses to 1982 BEBE observations.

Ten years ago, original BEBE member Bernard E. Anderson supported government-sponsored skills-training programs for black youth and the unemployed. "We need a two-track attack on the [unemployment] problem. One track to deal with dislocated workers [in industries that have suffered severe layoffs], one track to deal with black youth, inner-city people, and the minority, female, single parent--some of whom have never had a job. Instead of reducing federal assistance to education, we ought to increase it."

Today, Anderson advocates a more aggressive approach. "In 1982, we were in the grip of a recession. It was obvious that the problem of dislocated workers was serious. It is interesting that although some of the same conditions are evident, the sharp decline in this economy has not been characterized by the steep drop in economic production and employment. The 1980-81 unemployment rate was 10%. Our current rate may peak out at 7.2% or 7.3%."

Anderson says that this recession has been exacerbated by structural changes in the American economy as America attempts to improve its competitive condition in the global market. "Look at the last nine to 12 months. You have massive layoffs by some of the major corporations that are not directly attributable to this recession. Many corporations are not downsizing and reducing their costs to survive, but rather to compete more effectively. These permanent layoffs make current conditions more perilous than when we first met," Anderson explains. "Therefore, the policy prescription that we recommended is no longer appropriate. What we need now is not just a two-track system, but rather a comprehensive industrial policy that will affect the economy across the board."

Government intervention of a more traditional type typified Andrew F. Brimmer's prescription for existing the 1981-82 recession. A former governor of the Federal Reserve Bank, he forecast that President Reagan's loosened tax structure and investment incentives would "lead to substantially higher growth rates than otherwise would have been the case," and "blacks will get a substantial share of that growth."

Current BEBE member Emmett J. Rice, another former Federal Reserve governor, is critical of that remedy. He agrees that the early Reagan tax changes benefited business in the 1980s, at least until the 1986 Tax Reform Act, which trimmed their influence. But, he says, "the main engine for growth was the overall budget deficit. That growth was borrowed growth. We're paying for it now." Although he agrees that growth is good for the minority community, he believes that the growth we have experienced "was not solidly based."

Another area where solidity has been lacking, for black-and white-owned institutions alike, has been among commercial banks and savings and loan institutions. At the end of 1981, there were 46 black-owned commercial banks with assets of $1.3 billion and 40 savings and loans with assets of $989 million. By 1990, the total number of black banks had shrunk by a third to 35 and the number of thrifts cut in half to 20. (For a detailed look at the BE FINANCIALS, see this issue.) The assets in both industries have grown marginally, with total assets of $1.9 billion and $1.2 billion in banks and thrifts, respectively.

The emergence of a smaller number of relatively stronger banks and thrifts was predicted by former board member William D. Bradford back in 1982. Disregarding some critics predicting their demise or merger, he said: "If you look at those institutions, you will notice that a lot of them have been well managed. In addition, they have chosen niches of operation and have made changes as the laws have changed."

Emmett J. Rice calls Bradford's forecast prescient, if not perfect. "Of course Bradford could not have taken into account the shakeout in the banking industry," Rice says. "Minority financial institutions were affected by this very turbulent environment of the late 1980s. But despite that, black institutions have weathered the storm well."

In fact, Veribanc, the Wakefield, Mass.-based company that tracks financial institutions, gives seven of the 25 largest black-owned banks and thrifts its highest rating (three stars). Rice is not surprised. He says, "I think the next 10 years will see continued growth, with several black financial institutions experiencing above-average growth as compared to the industry."

The development of better management teasm to boost business achievement has always concerned the BEBE. Such concerns led former board member Alfred E. Osborne to remark, "black people have to go into business where the growth possibilities are--and we need the managerial and technical skill necessary for survival."

Since 1982, the BE INDUSTRIAL/SERVICE 100 list has been transformed. More companies are high-technology businesses, and fewer rely solely on government contracts. The change pleases Marcus Alexis, a Northwestern University economics professor, who says that "African-Americans cannot hope to make a major change in our economic status if all we do is fish in regulated waters. To catch the big fish, you have to be where the big fish are."

Of course, one must have the right equipment to catch big fish. David H. Swinton, dean of Jackson State University School of Business, in Jackson, Miss., says despite growth and success, the nation's largest black businesses are still hobbled by their inability to acquire "sufficient resources, technology and capital."

Black demands for equal opportunity met fierce competition from white women throughout the 1980s, an issue that greatly worried former BEBE member Phyllis A. Wallace. Wallace, who at the time was a professor at the Sloane School Of Management of the Massachusetts Institute of Technology, forecast a twofold threat. First, she believed that white women would continue pushing black women out of many lower-level retail and service industry jobs. The second problem, as she saw it, was that not only were these jobs permanently gone, they were in industries where blacks were significantly represented in skilled and semi-skilled jobs. The result: "Many [black women] will not find jobs that match their previous salaries," she said.

It was an accurate prediction. In the 1980s, black women came under increasing job pressure as more white women went to work. But no one knew that more than 19 million new relatively low-paying service jobs woud be created by 1990, and prior to the 1987 stock market crash, job demand would often outstrip the number of applicants.

There were other factors as well. But current BEBE member Courtney N. Blackman says Wallace was too pessimistic. "Educated black women have not done badly. The people who have done worse are the semi-skilled. Their jobs are disappearing anyway as the nation moves into service areas where people are going to need more education. Black males, who are not going to school in numbers as before, are the ones we have to worry about." Regardles of race of gender, the competition will be tougher throughout the 1990s as employers continue to demand top skills, Blackman adds.

An Economy In Hibernation

The first challenge in the 1990s, however, is to improve the economy at the macroeconomic level. Andrew F. Brimmer, president of Brimmer & Co., a Washington, D.C.-based economic and financial consulting firm, says that although the economy has recovered from the recession, it remains "in hibernation." Translation: Output levels are up, but the growth rate is too small to stem unemployment and improve productivity. During 1992, this will result in an anemic growth rate. On the positive side, inflation will not be a problem.

The weak growth projection is clear. In 1991, gross domestic product (GDP), which focuses on output within U.S. borders and replaced gross national product (GNP) as the measure for market value of production, declined by 0.7%. The decline was led by decreases in personal consumption, which is two-thirds of annual GDP, nonresidential and residential investment and net exports. Yes, the successful Persian Gulf War boosted consumer confidence and buying through Summer 1991. But businesses continued restructuring to increase efficiency, spiking unemployment and weakening real disposable income. In turn, this lowered confidence and decrease spending, hiring, income and employment.

This all points to moderate growth 1994. In 1992, Brimmer says GDP will grow 1.4% (see chart) well below the 2.5% rate needed to keep unemployment from rising. However, the fourth-quarter rate is projected to be 4% and 1993's full-year rate, a projected 3.6%. The weakness, says Brimmer, stems from 8.8 million unemployed workers through June 1992. That will dampen disposable personal income and total consumption, factors ensuring that fixed investment, home building and net exports will expand only moderately.

Can the Federal Reserve assist growth? Brimmer says lowering interest rates will lighten consumer and corporate debt and boost home, car and new plant and equipment sales. But he is skeptical of continued calls for a 15.4% capital-gains tax cut. Presently held assets may be sold, but he doubts the gains will be used for "new real investment, new enterprises or new risk-taking."

The answer? Brimmer has his own 10% federal personal income tax cut (See "GNP Blues: A Tax Cut May Be The Cure," Economic Perspectives, March 1992). He says it would keep $52.8 billion in the economy and add 13% to projected income.

Emmett J. Rice disagrees. He thinks the current growth rate is fine and short-term interest rates, such as the discount rate, will probably drop by 1993. He also dislikes the timing and the object of the fiscal stimulus. "I would put the emphais on trying to stimulate investment in the economy rather than stimulating consumption," he adds.

Brimmer's response: Consumption is two-thirds of GDP. Bernard E. Anderson agrees. To him, Rice is "unduly cautious about fiscal stimulus and unreasonable optimistic that the reduction in interest rates is likely to move the economy beyond where it is now. The consumer perception is that their futures are likely to be in jeopardy. Historically, we have moved out of most recessions with a 6% to 7% growth rate."

The Impact On African-Americans

Not everyone will benefit equally from the recovery, says Brimmer. "The slow expansion of the nation's economy projected for 1992 will restrain the progress of black Americans. The number of jobs will show little increase, and unemployment will rise further. . . . The income gap faced by blacks will become even wider," he explains.

The numbers support his view. Through the first two months of 1992, there were 13.7 million blacks in the civilian labor force or 10.8% of the total--down from the annual average of 13.5% for 1991. Blacks also held 11.8 million jobs or 10.1% of total employment. If African-Americans had job parity (where the black share of total employment equaled the share of the civilian labor force), blacks would have held 1.1 million more jobs.

The black unemployment rate for 1991 was 12.4% and the number of black unemployed averaged 1.7 million or nearly twice the average for the country as a whole and 2.1 times that of whites. In 1992, the black unemployment rate may average 12.7% in 1992 versus 6.9% for the total civilian labor force and 6.1% for whites.

In 1990, the last year for which official U.S. Census Bureau figures were available, black money income was $265 billion or 7.5% of the total, $3.5 trillion. If blacks had achieved income parity, their total money income would have been $381.3 billion in 1991 or $116.5 billion more than they recieved. In 1991, black income rose to an estimated $278 billion or 7.5% of the total, $3.7 trillion. The parity level was an estimated $400 billion and the black income deficit was $121.7 billion or 30.4%

But slow employment growth in 1992 will blunt income rises. total money income may increase to $3.9 trillion and the black share may be $293 billion or 7.6% of the total. Parity income for blacks, 10.8% of the total, would be about $420 billion or $127 billion more than they are likely to have. The income deficit would be equal to 30% of the parity level.

Economic Growth And Blacks

Between now and 2005, the U.S. growth rate will be a moderate 2.3%. At least that is one of the projections made by Margaret C. Simms of the Joint Center. This will be a decline from the 2.9% growth rate average between 1975 to 1990. The reason: Between now and 2005, the U.S. labor force will be smaller. Thus, growth will be derived from increased quality in labor and capital, not simply the output of more workers.

During the next dozen years, 66% of the fastest-growing occupations and 50% of those with the largest numerical increases will need education and training beyond high school. But only 37% of black workers and 26% of the non-white Hispanic work force have education beyond high school compared with 46% of the overall work force. It is evident, Simms says that "the key to creating a productive work force is quality education and training. . . . Increased real incomes are closely related to education. For blacks especially, higher educational levels are associated with greater employment and higher earnings."

She advocates that a comprehensive strategy for improving the productivity of the U.S. work force will provide: adequate preparation of new entrants to the labor force; the upgrading of low-skilled workers; and the retraining of ad lt workers for new jobs and improved technology.

But specific steps must be taken, including:

* More government-sponsored job-training programs.

* Using the "peace dividend" to boost education. Breaking the wall between defense and domestic spending may be one way in which an increased reduction in defense spending can be used to build up education and training.

* Ensuring increased involvement of community organizations in training black children.

* Holding public schools more accountable.

* Revising school programs to improve learning and to enhance self-esteem among students. Vocational programs need to be revamped. If an apprenticeship type program is introduced, steps must be taken to ensure that it improves the opportunities of those who need them most.

* Increasing the responsibility shared for ensuring that children enter school ready to learn.

* Encouraging more business involvement in education and training. This requires businesses to invest in workers through the provision of on-the-job training outside the workplace.

In the 10 years since the bEBE first convened, economic, progress has been made. But to derail Sir Arthur Lewis' black unemployment nightmare, we still must find a way for all African-Americans to partake in the nation's growth.
COPYRIGHT 1992 Earl G. Graves Publishing Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:The B.E. 100s; 1980's
Author:McCoy, Frank
Publication:Black Enterprise
Article Type:Cover Story
Date:Jun 1, 1992
Previous Article:The freshman class of 1992.
Next Article:Overview: a tale of two decades.

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