Black Buying Power Continues to Rise
SUBMITTED BY: Jeffrey M. Humphreys, Director of the University of Georgia’s Selig Center for Economic Growth
BLACK BUYING POWER: Recession and Resiliency
Despite the severe impact of the Great Recession, Blacks’ economic clout continues to energize the U.S. consumer market. The Selig Center estimates that the nation’s Black buying power will continue its dramatic rise — $316 billion in 1990 to $600 billion in 2000, to $947 billion in 2010–to $1,038 billion in 2012, and a projected $1,307 billion in 2017.
The 73 percent gain from 2000 to 2010 outstrips the 60 percent increase in white buying power and the 67 percent increase in total buying power (all races combined) for the same period. In 2012, Blacks’ share of the nation’s total buying power will be 8.5 percent, up from 8.2 percent in 2000 and 7.5 percent in 1990. And their share is expected to rise to 8.7 percent by 2017, accounting for almost nine cents out of every dollar spent.
Several critical factors account for the gains in Black buying power. Beyond population growth and inflation, one of the most important and enduring forces is the increasing number of Blacks starting and expanding their own businesses. The 2007 Survey of Business Owners, released by the U.S. Census bureau in June 2011, shows the number of Black-owned firms grew 61 percent in just the five years from 2002 to 2007, more than three times the gain in the number of all U.S. firms (18 percent). Also, compared to the previous five year period, the overall rate of growth in the number of Black-owned firms accelerated (as did the rate of growth in the number of all U.S. firms). Between 2002 and 2007, the receipts of black-owned firms grew by 55 percent compared to the 34 percent increase in the receipts of all U.S. firms.
Still another positive factor driving the group’s buying power is its steadily rising levels of educational attainment, which should allow proportionally more Blacks to enter occupations with higher average salaries. Census data show that the percent of Blacks 25 and older who have completed high school or college rose from 66 percent in 1990 to 79 percent in 2000 and to 84 percent in 2010. Also, the 2010 Current Population Survey indicates that 20 percent of Blacks had a bachelor, graduate, or professional degree. The percentage of Blacks who had completed college in 2010 (20 percent) was higher than in either 2000 (17 percent) or in 1990 (11 percent).
Favorable demographic trends help, too, since the Black population continues to grow more rapidly than the total U.S. population. From 2000 to 2012, the nation’s Black population grew by 16 percent vs. 7.6 percent for the white population and 12.2 percent for the total population. From 2012 to 2017, the Black population is projected to grow by 6.9 percent, exceeding the 5.7 percent growth estimated for the total U.S. population. Also, the Black population is younger: The 2010 Current Population Survey put the median age of Blacks at 31.4 years compared to 38.2 years for the white population and 36.7 years for the total population. Indeed, nearly 30 percent (29.4) of the Black population is under 18 years old (vs. 23.3 percent of whites and 24.6 percent of the total population). Because blacks are so much younger, it’s no surprise that they’re increasingly setting trends for youth (and young adults) of every race and ethnic background.
The youthful profile of the Black population does have its downside, however. Compared to people who are either more established in their careers or retired, young people, regardless of their race or ethnicity, are more exposed to job losses in economic downturns. In this regard, Black buying power is vulnerable to the effects of economic recessions, but over time the above-average growth of Black buying power has more than compensated for that high cyclical exposure.
Due to the unusual severity of the Great Recession, employment growth can no longer be cited as one of the main forces behind the above-average gains in Black buying power. From January 2000 through January 2012 (the most recent data available as of this writing), the number of jobs held by Blacks had increased by only 235,000, or a paltry 0.1 percent per year. And, from its pre-recession peak in July of 2007 (when blacks held 16,307,000 jobs) through January of 2012 (when blacks held 15,512,000 jobs), the number of employed African Americans dropped by 795,000, representing an . unemployment rate of 14.2 percent (up from 8.9 percent in July ’07). In January 2012, the employment to population ratio for blacks stood at only 52.2 percent (vs. 59.3 percent in July 2007).
This recession was the worst since the Great Depression, and it erased a decade’s worth of job growth for African Americans. At the time of this writing, it appears that the period of job losses is over, but the labor market is recovering very slowly, especially in states hit hardest by the housing bust.
In 2012, the 10 states with the largest African-American markets, in order, are New York ($95 billion), Texas ($86 billion), California ($77 billion), Florida ($74 billion), Georgia ($73 billion), Maryland ($63 billion), North Carolina ($48 billion), Illinois ($47 billion), Virginia ($45 billion), and New Jersey ($40 billion). Of these, Maryland, North Carolina and Georgia are the only ones that did not rank among the top 10 markets for all consumers.
Unlike the Hispanic and Asian markets in the U.S., the African-American market is not concentrated in a handful of states. This vibrant consumer market is very widespread, making it an attractive customer segment in many of the states.
Due to differences in per capita income, wealth, demographics, educational attainment, occupational distribution, geographic distribution, and culture, the spending habits of Blacks as a group are not the same as those of non-black consumers (e.g., white and other races combined). Thus, as African Americans’ share of the nation’s total buying power expands, business-to-consumer firms can be expected to devote more resources towards developing and marketing products that meet the needs and match the preferences of black consumers.