As the report shows, wealth disparities by race increased during the pandemic, despite income gains

NEW YORK (`) — Strong performance in financial markets, particularly an outsized rise in the stock market in 2021, helped solidify existing trends in wealth inequality during the pandemic, new data released this week show.

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According to a report from the New York Federal Reserve Bank, from the first quarter of 2019 to the second quarter of 2023, the real net worth of white individuals is 30 percentage points and 9 percentage points higher than that of black and Hispanic individuals, respectively.

This period saw a remarkable level of government financial support and a surprisingly strong labor market after the initial shock of the pandemic. The unemployment rate for Black Americans in particular is currently at 5.3%, near a record low, compared to an overall unemployment rate of 3.7%. The typical full-time Black worker's income has increased 7.1% since before the pandemic.

Closing the wealth gap is more difficult because significantly more white households traditionally have money in stocks and mutual funds. A separate Fed survey shows that in 2022, about 65.6% of white households had invested in stocks, compared to 28.3% of Hispanic households and 39.2% of Black households.

“The study really shows the difference between gains in income and closing that gap and wealth,” said Janelle Jones, vice president of policy and advocacy at the Washington Center for Equitable Growth.

While government support such as higher unemployment benefits and stimulus packages helped avert a coronavirus-induced recession, as the economy reopened through 2021, financial asset prices rose so much that racial wealth disparities widened. And although these market-linked assets fell in 2022 as the Federal Reserve rapidly raised interest rates, “these declines did not fully offset previous increases,” according to the New York Fed.

“Much of the divergence in net worth by race and ethnicity since 2019 can be attributed to divergence in the real values ​​of financial assets held,” the report authors wrote — including the fact that Black households have more wealth in bonds than in stocks . Mutual funds and exchange-traded funds or ETFs.

The New York Fed found that more than 50% of Black financial wealth is invested in pensions. Less than 20% of black wealth is stored in private companies, corporate stocks and mutual funds. In contrast, less than 30% of white financial wealth is invested in pensions, with about 50% invested in companies, stocks and mutual funds.

“Black workers are still more likely to be unionized, which could play a role in the pension story,” Jones said. “But how people are exposed to the opportunity to invest in the stock market – whether they grew up with it or not – we know that is different for white families than for people of color.” Black family members would be less likely to have one To get an inheritance, she said.

During the pandemic, the real value of financial assets held by Blacks fell below 2019 levels in 2022 and continued to decline steadily, while the real value of financial assets held by Hispanics fell below 2019 levels in 2022 and remained stagnant. Real financial assets of both groups have not recovered to 2019 levels.

Owning a business is another component of financial wealth, and separate data shows Black-owned businesses have had a tougher time during the pandemic.

While less than 10% of all U.S. business owners are Black, Black-owned businesses were also more concentrated in the industries hit hardest when COVID first spread, according to an analysis of government data by the Economic Policy Institute. As of April 2020, more than 40% of Black business owners reported not working, compared to just 17% of white business owners.

The industries with the greatest overall job losses early in the pandemic were also sectors with more Black-owned businesses concentrated — accommodation, food services, retail, health care and social assistance. According to the Bureau of Labor Statistics, about 28% of Black-owned businesses are in these industries, compared to nearly 20% of white-owned businesses.

Still, Deputy Treasury Secretary Walley Adeyemo said Wednesday that economic conditions for Black households are improving, citing rising employment and wages for Black Americans since before the pandemic, as well as an increase in Black business ownership and participation in the stock market.

Adeyemo suggested that some “policy regulations” may be needed to balance the distribution of financial wealth in the US

“The gap between black and white wealth in America is still too wide,” he said.

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