Slump extra hard for black business
Washington — As the US economy slips deeper into recession, the nation's 300,000-plus black-owned businesses are facing severe problems not shared by their white competitors:
* With unemployment for black males rising faster than the overall unemployment rate, that means less disposable income for black families. This in turn means less spending at the thousands of "mom and pop" family-owned businesses that primarily serve the black community.
* The slump in such "big ticket" industries as housing and autos is directly hitting scores of medium-size industrial companies owned or controlled by blacks. Many of these tend to be "single supplier" companies that provide one basic service -- or one or two product lines -- to primary producer industries.
In many cases, financial analysts here say, these minority-owned companies are finding it nearly impossible to obtain needed bank credit because of recent Carter administration credit curbs.
Now they are being forced into job layoffs because of recession.
The administration, however, has challenged the view -- now held by an increasing number of private economists -- that black businesses may be in special trouble during this recession.At a recent press conference, Commerce Secretary Philip M. Klutznick said blac-owned companies are not facing any emergency.
Officials of the Minority Business Development Administration (MDBA), in the Commerce Department, are not so certain, however. In fact, a national conference of black auto dealers held here in May indicated that black-owned dealerships may be in deep trouble because of the recession.
Of some 230 minority-owned dealerships in the United States, 50 have already folded because of high operating costs and difficult financing problems. Of the others, few are expected to show a profit this year, and the minority dealers are seeking special low-interest federal loans to ward off what they call a "disaster."
At the recent black auto dealer conference, for example, only 3 of 50 dealers who attended indicated they would post a profit this year.
According to an official of the MBDA, the agency (which provides counseling services to black-owned firms, but not financial assistance) is planning analytical studies of other key minority enterprises, such as contracting firms and small retail outlets.
Moreover, officials of minority-owned businesses, as well as elected black political leaders, will meet with Vice-President Walter F. Mondale late this month or early in July to discuss the needs of black businesses. Mr. Mondale has had previous discussions with black business leaders.
Black leaders, for their part, are seeking a one-year moratorium on payment of loans to minority companies from the Small Business Administration and the Economic Development Administration, both Commerce Department agencies.
Black officials are also proposing that a special $1 billion emergency loan fund be set up for minority businesses, with interest payments pegged at 2 percent over a 15-year period.
Observers like Rudy Oswald, chief economist for the AFLCIO, point out that one special problem for the black community is that the unemployment "base" is higher at the start of this recession than was the case with the severe 1973-75 downturn. At the start of the 1973 slump, the jobless rate for blacks was about 9 percent. But late last year, around the start of the current recession, the rate was 11 percent.
That means, in effect, that blacks never fully recovered from the earlier slump. This in turn means difficult financial problems for minority-owned businesses.