I looked through my crystal ball to get a glimpse of the American economy in 2003, but, unfortunately, clouds of uncertainty obscured my vision.
The most vexing uncertainty arose from America’s ongoing war on terrorism and the possibility of war with Iraq. If the war against terrorism expands significantly, the economy will probably be adversely affected. Another concern is business investment, which may remain sluggish. If it does, the stock market will most likely continue to be bearish. The consumer — whose sustained spending has kept the economy going — may not boost outlays very much. On the other hand, reflecting low mortgage interest rates, home building will probably continue to be a strong trend.
As I weigh these pluses and minuses, I am cautious about the economic outlook. After adjusting for inflation, gross domestic product (real GDP) may increase by 2.3% in 2003. Consequently, there is little risk of the economy sliding back into recession.
Some more bad news: Because the economy will be expanding only moderately, employment will not show marked improvement in 2003. Layoffs will continue at many companies. As a result, total employment may rise by only 1%, and the unemployment rate may average 5.8%. The overall unemployment rate was 5.7% this past August (9.6% for African Americans).
Given this uncertain outlook for the nation at large, what are the prospects for African Americans? Here, the answer is even more uncertain. Historically, blacks have been “the last hired and the first fired.” While such blatant discrimination has lessened considerably, African Americans are still at a competitive disadvantage in the labor market. Consequently, the unemployment rate for blacks may be around 9.3% — about 1.6 times that for all workers, 1.3 times that for Hispanics, and nearly twice the unemployment rate for whites.
In summary, in the uncertain times ahead, blacks will run a greater risk than whites of losing their jobs and of being unemployed for longer periods of time. So it would be wise for African Americans to moderate spending to an even greater extent than is generally expected of all American consumers.
Dr. Brimmer, a member of the BLACK ENTERPRISE Board of Economists, served on the Board of Governors of the Federal Reserve System and is currently president of Brimmer & Company Inc., an economic and financial consulting firm based in Washington, D.C.