By Ian Swanson - 07/07/09 08:20 PM EDT
In June, the unemployment rate for blacks was 14.9 percent, compared to 8.6 percent for whites. The rate is 12.7 percent among Hispanics, according to the Department of Labor. Since the recession began, unemployment has gone up 6 percentage points for Hispanics, 5.8 points for blacks and 4.3 percent for whites.
To Jim Carr, chief operating officer for the National Community Reinvestment Coalition, this means more stimulus dollars need to be targeted toward inner-city neighborhoods and poor rural areas of the country. Besides funding highway projects, stimulus dollars should be spent on everything from repairing city streets and light fixtures to dealing with abandoned buildings and funding daycare centers, he said.
While labor groups have also called for another stimulus, other Democratic-leaning groups have been cautious. Calling for another stimulus would be tantamount to acknowledging the first didn’t work.
The National Council for La Raza hasn’t taken a position on whether there should be another stimulus, but it is calling for representatives of high-unemployment communities to have a seat at the table in determining stimulus spending decisions.
In a joint press release with the NAACP on Tuesday, La Raza CEO Janet Murguía said blacks and Hispanics had “seen the worst of this recession.”
Catherine Singley, a policy analyst for La Raza, notes that plenty of funds from the $787 billion stimulus package have yet to be spent, meaning they could still be used to help minority communities.
Higher unemployment in the black community is nothing new, as the rate tends to be double that of whites. “That’s been the case since the late ’60s,” said Algernon Austin, director of race, ethnicity and the economy at the Economic Policy Institute.
Austin’s research concludes that the unemployment rate for blacks remains double that of whites across education levels. In 2006, he noted, unemployment was 2.5 percent for white men with college degrees but 5.1 percent for blacks.
He calls on the government to forcefully police stimulus dollars to make sure employers aren’t discriminating against minorities in their hiring practices.
In the statement with La Raza, NAACP Vice President Hillary Shelton did not call for another stimulus, but said the high unemployment figures for minorities are “conservative estimates and do not even capture the true extent of joblessness in these communities.”
More bad mortgages
The housing crisis at the center of the economic crisis will only get worse as unemployment rises, and it could soon be aggravated by a new wave of troubled mortgages.
Option-adjustable rate mortgages (option-ARMS) are “worse than sub-prime loans in terms of total value,” said Carr, who is worried their failure could make the housing crisis worse.
According to data tracked by FirstAmerican Core Logic, a housing analyst, nearly 37 percent of all option-ARMS were more than 60 days delinquent in April. A year ago, 15.6 percent of the loans were more than 60 days delinquent.
McClatchy News, which dubbed them the “son of sub-prime” in a June story, reported 564,000 outstanding option-ARMS remain.
Option-ARMS began to be offered in 2004 and continued to be sold on the market for several years. The loans allow homeowners to pay minimum payments on their mortgages that, in some cases, did not cover all the interest due on the principal.
Higher payments are set to kick in on a time period — usually five years — or in some cases, once interest hits a ceiling set when the loan is taken out. Many think a wave of the mortgages will kick in with higher payments later this year and in 2010.
For a glimpse of the problems the loans can cause, take a look at First Federal Bank of California, which handled $4.4 billion in option-ARMS loans. It lost hundreds of millions of dollars and saw its stock fall to pennies.
The bank is continuing to offer loan modifications to customers, though bank CEO Babette Heimbuch said many of those remaining have low interest rates and can afford their mortgages. Most of those who took out option-ARMS on several properties as an investment are now out of the market.
Still, she said, a segment of the loans must come home to roost.
“You’ve got a lot of loans, at times to people who never should have got the loan,” she said.