Black-Owned Firms Still Close at Double Whites’ Rate in U.S.

Black-owned small businesses continue to bear the worst of Covid-19’s economic pain in the U.S., shuttering at a rate that’s more than double that of White owners despite a partial rebound in May, according to a recent study tracking closures across the country.

Nationwide, 26% of African American business owners closed between February and May, compared with 11% for their White counterparts, a National Bureau of Economic Research paper shows. Black business owners are faring worse partly because of their heavy concentration in industries deemed non-essential and forced to shutter in lockdowns. Immigrants were a close second among demographic groups, with a 25% closing rate.

The new numbers are actually an improvement over an earlier NBER study by the same economist, Robert Fairlie of the University of California at Santa Cruz. Data covering the start of the pandemic through April showed that 41% of Black business owners had closed for that period, at least temporarily. A reopening of many states and a modest economic recovery in May benefited all groups, but the racial gaps persisted.

“If a more complete rebound does not happen soon the long-term economic consequences could be severe,” Fairlie said in his new research paper. “Many minority business owners will not have the resources to weather prolonged closures, reduced demand from health concerns and a more comprehensive recession.”

Here’s a look at how the main racial and demographic groups had fared in terms of business losses, by April and by May, in the NBER papers:

Group

February to April

Percentage change

February to May

Percentage change

Losses, February to May

Number of businesses

Black-41%-26%-280,448
Immigrant-36%-25%-790,455
Latinx-32%-19%-402,642
Asian-26%-21%-188,135
White-17%-11%-1,180,111
Total-22%-15%-2,202,745

Overall, the number of small-business owners operating nationwide fell by 2.2 million between February and May, or a loss of around 15% of the U.S. total. Things aren’t as dire as they were in April, when NBER data showed a 22% drop-off in small businesses that shuttered at least temporarily.

However, the nation still has a long way to climb back. For comparison, during the Great Recession, the number of active business owners fell by only 5%, according to the NBER. The study makes no assumptions about how many businesses will remain shut permanently, or whether federal relief programs such as the Paycheck Protection Program will succeed in keeping them afloat.

Being in a favorable industry appears to have played a role in racial disparities. The percentage of Black business owners in essential industries, at 66%, is lower than the national average of 76%, the most recent study shows.

After Blacks and immigrants, the next hardest-hit demographic groups were Asian and Hispanic business owners, who saw 21% and 19% of their businesses close, respectively.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.