Columnists John Grace Opinion

ON THE MONEY: The next recession hits blacks and Hispanics hardest

In earlier columns, I have addressed President Donald Trump’s assertion about the U.S. economy that, “This is the greatest economy that we’ve had in our history, the best.”

Let me be clear: it’s not. Trump’s trademark hyperbole consistently takes favorable economic news and then wildly exaggerates it in his boast of record achievement.

Trump’s “record of achievements on the economy and jobs ignores the Roaring 20s, the war-time boom in the 1940s, the 1990s expansion and other times when unemployment was lower than now, economic growth was higher than now, or brisk productivity made the U.S. the world’s economic powerhouse,” per AP Fact CheckJune 4, 2018.

From the same source: “Economists generally describe the U.S. economy as healthy for the moment, but they are naturally cautious about claiming that it’s without weaknesses. An economy this large and diverse has a way of thwarting any hubris.

“What looks phenomenal at one moment can be the source of a downfall later. The happy days of the 1920’s gave way to the Great Depression, the tech boom led to a burst bubble, and the surge in home ownership in the mid-2000s led to a devastating crash.”

It is logical to this observer when we fail to learn from history it will almost certainly rhyme, if not repeat itself. It is particularly worthwhile for minorities to learn from the past since we are all too familiar with the reality of last hired, first fired.

No one needs to predict the future to prepare for it. And in the throes of shock and awe, whether caused by nature or by man, there is no time to get ready.

A 2011 Pew Research report revealed that at the time the Great Recession ended in 2009, “That median wealth fell by 66% for Hispanics and 53% for black households. Those numbers compare to only 16% with white families. 

“As a result of these declines, the typical black household had just $5,677 in wealth (assets minus debts) in 2009, the typical Hispanic household had $8,325 in wealth, and the typical white household had $113,149,” the report noted.

“On a national level across all races, the top 1% captured 85% of post-recession income growth from 2009 to 2013,” according to an Economic Policy Institute study on income inequality, reports Yahoo Finance, Aug. 30. The study found while some states recovered 100% of those gains, but when race was taken into account, blacks and Hispanics haven’t fared nearly as well as their counterparts.

Minorities were hit particularly hard when the housing bubble burst, “which eventually triggered the recession in 2007,” notes the same Yahoo Financearticle. “The homeownership rate for Hispanics fell, hitting 47% in 2009 from 51% in 2005.”

The study also noted that this might be due to the “disproportionate share” of Hispanics who live in California, Nevada and Arizona, some of the states that saw the steepest declines in housing values since the real estate market bubble in the 1990s.

By 2009, “the black ownership rate was 44.5%, down from 49% in 2004,” according to the National Association of Realtors. “The white ownership rate by the end of the recession was 71%, down from 76% just five years prior.”

Like Yogi Berra once said, “It’s like déjà vu all over again.”

“Many American blacks today are already experiencing a silent economic depression that, in terms of unemployment, equals or exceeds the Great Depression of 1929,” says the 2009 report “The Silent Depression,” from the nonpartisan organization United for a Fair Economy. Minorities were also hit the hardest when the economic downturn caused the unemployment rate to soar.  

Approximately 8.1 million jobs were lost starting in December 2007. By October 2009 the unemployment rate was 15.7% for Blacks, 13.1% for Latinos and 9.5% for whites, according to a 2010 study from the University of Illinois Institute of Government & Public Affairs.

There are seven ways to help recession-proof your finances.

• Pay down or pay off debt.

• Increase your emergency savings.

• Work towards the habit of saving 20% first and spending 80% second. Repeat every month.

• Establish personal financial goals for life after your last paycheck

• Secure sufficient life insurance in the event of income loss due to premature death.

• Determine in advance how much loss you can accept.

• And see how you can design your portfolio to perform within your loss parameters.

John L. Grace is president of Investor’s Advantage Corp, a Los Angeles-area financial planning firm that has been helping investors manage wealth and prepare for a more prosperous future since 1979. His On the Money column runs monthly in The Wave.