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| AP |
Strong financial market performance, particularly notable stock market gains in 2021, has helped solidify existing trends of economic inequality during the Covid-19 pandemic, according to new information released last week.
According to a report by the Federal Reserve Bank of New York, the real net worth of white individuals exceeded that of black and Hispanic individuals by 30 percentage points and 9 percentage points, respectively, from the first quarter of 2019 to the second quarter of 2023.
The period saw an extraordinary level of government financial support and, after the initial shock of the pandemic, a surprisingly strong labor market. Today, the unemployment rate among African Americans in particular is 5.3%, near a record low, compared to an overall unemployment rate of 3.7%. Earnings for the average full-time African American worker have increased 7.1% since before the pandemic.
Closing the economic gap is more difficult because a significantly larger number of white households tend to have money in stocks and mutual funds. Another Fed survey shows that by 2022, about 65.6% of white households had stock investments, compared to 28.3% of Hispanic households and 39.2% of African American households.
"The study really shows the difference between getting increases in income, and closing that gap, versus when it comes to wealth," said Janelle Jones, vice president of policy and advocacy at the Washington Center for Equitable Growth, a non-profit research center.
While government support—such as increased unemployment benefits and stimulus checks—helped prevent a Covid-19-induced recession, financial asset prices rose so much as the economy reopened throughout 2021 that wealth disparities between races widened. And while those market-related assets did fall in 2022 as the Federal Reserve rapidly raised interest rates, "those declines did not fully offset the initial gains," according to the New York Fed.
"Much of the discrepancy in net worth by race and ethnicity since 2019 can be attributed to the discrepancy in the real values of financial asset holdings," the report's authors noted, including the fact that black households concentrate more wealth in pensions than in stocks, mutual funds, and exchange-traded funds.
More than 50% of the financial wealth of African Americans is invested in pensions, the New York Fed found. Less than 20% of the wealth of this population group is held in private businesses, corporate stocks and mutual funds. In contrast, less than 30% of the financial wealth of whites is invested in pensions, and about 50% is invested in businesses, stocks and mutual funds.