It may not be as sexy as the dating lives of rappers, the bad karma of a thieving white Big Pharma whiz kid or what went down in the latest episode of your favorite show. And, sure, it’s not the latest in a string of racist things a presidential candidate or Supreme Court justice said.
So, it’s OK to admit you probably slept through or glossed over news of the Federal Reserve’s decision to raise interest rates a quarter point. The problem, however, is that it directly squeezes the one thing that keeps most, if not all, struggling black folks up at night: money.
African Americans, especially, remain lost in the economic woods, a reality sealed by the vagaries of a Groundhog Day recession. It’s still rough out there, despite headlines of a plummeting jobless rate and glitzy ads that make you want to run to the nearest car dealership. Maybe that whiter segment of the population is doing all good enough to move on to terrorism as its top issue for 2016. But, as this most recent YouGov poll (pdf) confirms, black voters rank living standards as the top priority, with a 23 percent majority viewing Social Security as the most important out of 15 issues (compared with a 20 percent majority of whites caught up in a terror frenzy).
That might seem strange, but it’s not. It just means that quite a few African Americans are living tight.
“Nearly 40 percent of black households have no financial assets [pdf],” New School economist Darrick Hamilton breaks down for The Root. “The black median value of household assets is about $200—only $25 if retirement savings are excluded!”
The absence of basic safety nets like Social Security (and health care, which blacks ranked second) are a much more threatening prospect than the Islamic State group.
A seemingly innocent and, at best, obscure hike in interest rates makes that kind of living much tighter. Economically, for underserved people of color, it’s like an odorless gas fatally snaking its way through your house.
“Increasing rates and putting downward pressure on wages will leave many hardworking Americans ill-equipped to deal with the borrowing expenses that are necessary to pay for everyday needs,” says Rep. Maxine Waters (D-Calif.), ranking Democrat on the House Financial Services Committee, who’s been the loudest about this on Capitol Hill for some time.
“And although unemployment has come down significantly since the depths of the crisis, the recovery has left many working families and minority communities behind,” she adds.
We keep seeing a 5 percent national unemployment rate, but that’s just mirroring white unemployment: The black unemployment rate is double that. But even that’s not the full picture. The Bureau of Labor Statistics only shows us those who are officially unemployed or what’s called the “U3” rate. When you consider the BLS “U6” rate (which they don’t want you to see), including those who are barely attached to the labor force, you get a 10 percent “real” unemployment rate—which means it’s double that for black folks.
Of course, we know stuff is still not right: If we’re not feeling it, we’ve got family that is. “If 9 percent [unemployment] is a demarcation of economic calamity, then black America remains in a state of economic crisis,” warns Hamilton.
Yet the Federal Reserve, in all its infinite wisdom, just completely ignored that. Black lives do not matter when policymakers throw down fiscal gauntlets. The Fed is conveniently far removed from the concrete jungle of urban ghettos or the foreclosed dreams of a black middle class sucked dry by recession. They are white men and women comfortably immersed in smartphones who only consider protecting the financial dispositions of people who look like them.
So when news of an interest-rate hike spread, it was reported with all the intensity of a vacation flight delay. The markets hiccuped but moved on. Well-to-do white middle-classers merely frowned at personal finance errands disrupting their day. Those classic white people problems: “Should I shift the mortgage to a fixed-rate alternative? Does my CD need a better rate? Oh my gosh, what do I do?”
Not to say there aren’t upwardly mobile black folks with similar concerns. But, generally speaking, blacks on average have very little to fall back on compared with easy-living white counterparts who can take financial punches. For low-income to just-getting-by middle-class blacks, it’s like Darth Vader breaking your neck.
“A lot of what our members are seeing is not what the Fed is reporting,” argues Kia Philpot-Hinton, a Philadelphia-based organizer for Action United, part of the Fed Up advocacy network that’s been warning Federal Reserve board members not to put a hard pinch on vulnerable populations. “But our voices aren’t heard when only individuals from a certain [Wall Street] sector are included in these conversations.”
So Philpot-Hinton tries to make connections between the interest-rate hike and the personal stories of Philly’s low-income residents, perpetually suffering in a place with the highest concentration of big-city extreme poverty in the nation. “Because, with interest rates raised, there’s less money flowing through the economy. We’re already struggling with less money,” says Philpot-Hinton. “For me, my outstanding student loans get more expensive. For many folks out here, it’s more unemployment because businesses relying on lines of credit now say they have fewer dollars to hire people. And with this city’s schools about to shut down from no money, the failing school system is forced to rely on lines of credit.”
Federal Reserve Board Chair Janet Yellen is living in a bubble because the Fed just doesn’t see that. Perhaps the Fed wants to put the brakes on an economy already struggling up a hill on low fuel? Amy Traub, a senior policy analyst at Demos, believes the Fed’s interest-rate hike is a “small step toward slowing down the economy.”
Not only are people out of work, Traub explains, but added pressure undermines collective worker-bargaining power for more jobs and higher wages. “Job openings are still scarce (1.5 workers for every available job), so it’s either hard to leave your current position for a better one or to convince your boss you need a raise. That means wages are still essentially flat.”
“Increasing interest rates begins to push unemployment back up and wages back down,” she says. “It is communities of color, which are already struggling with higher unemployment and disproportionately lower pay, that stand to be hit hardest.”
Stuck in the hype of economic Pleasantville and raising the interest rate just because it said it would, the Fed appears wickedly oblivious to any notion of black pain (sound familiar?). “More disturbing, for black men, the unemployment rate went up last month—because the number of black men reporting they were unemployed went up,” notes the AFL-CIO’s chief economist, William Spriggs. “The loss of jobs last month was in manufacturing, a key area of importance for black men. This leaves some very large imbalances in place for blacks.”
Spriggs leaves a grim reminder that black college graduates, stuck with unemployed rates that only match those of white high school grads, face a jobs future that’s increasingly bleak. Thanks to the Fed, it’s looking that much harder.
Charles D. Ellison is a veteran political strategist and a contributing editor at The Root. He is also Washington correspondent for the Philadelphia Tribune, a frequent contributor to The Hill, the weekly Washington insider for WDAS-FM in Philadelphia and host of The Ellison Report, a weekly public-affairs magazine broadcast and podcast on WEAA 88.9 FM Baltimore. Follow him on Twitter.