After Surviving The Economic Downturn of the COVID-19 Pandemic, Are Black Businesses Ready for the Recession?
Black businesses, large and small, were hit hard by the COVID-19 pandemic-induced recession of 2020. Now many are wondering if they’ll be able to make it through a second recession.
Forbes reports Black businesses bounced back strongly from the COVID-19 recession. Black women also used the pandemic to take control of their economic futures, and Black celebrities made it a point to help keep businesses afloat. However, many of those businesses still have the same vulnerabilities that existed before the pandemic, including low cash reserves, a lack of access to credit, and discrimination in the banking industry.
Many believe these vulnerabilities are likely to exist in the event of another economic downturn, which is becoming more likely every day. The Wall Street Journal surveyed a group of economists who have dramatically raised the probability of a recession. Around 44% of economists surveyed believe a recession will happen in the next 12 months. In January, 18% of economists believed a recession was coming, and in April, 28% of economists believed a recession was coming.
“If we do slip into a recession I predict that it will be bad for Black-owned businesses,” Robert Fairlie, a professor at the University of California, Santa Cruz told Forbes. He added that many such businesses already struggled through the pandemic “and don’t have large cash reserves, owner wealth, or access to bank credit to weather another recession.”
According to Fairlie, the number of Black businesses fell by 31% to about 770,000 in April 2020 from pre-pandemic levels. Additional research by Fairlie shows the number of Black businesses is now 9% higher than before than pre-pandemic, trailing only Latino business ownership.
Kevin Cohee, the chief executive officer of OneUnited Bank, told Forbes that Black America is better positioned to overcome an economic downturn than in previous years. Cohee also said the economic strength of Black America will help dictate whether Black businesses will survive.
“As people, we’re becoming much stronger,” Cohee says.
“We’re moving further and further away from the old model of … last ones hired and the first ones fired.”