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Analysis | The Finance 202: Nationwide protests highlight minority frustration with economic disparities

By Tory Newmyer

with Brent D. Griffiths
The death of George Floyd in the custody of Minneapolis police has touched off six days and nights of chaos and unrest across the country. But the rage fueling protests is longstanding, stemming not only from frustrations over racial disparities in criminal justice but economic outcomes, as well.
Minority communities already have absorbed disproportionately heavy blows from the twin crises of the coronavirus pandemic that has claimed 103,000 American lives while costing more than 40 million their jobs. Those shocks underlined a decades-long trend: Black households’ share of the national wealth and their median income have stagnated. So have other measures of African American well-being, with rates of unemployment and lack of health coverage, for example, persistently above the national average.

A demonstrator confronts a line Shelby County Sheriff's deputies while trying to cross the Harahan Bridge in Memphis, Tenn. (Daily Memphian via AP)

It’s not clear yet how long the protests will last and what impact they will have on the 2020 election and the policy discussion around it. But if the conflagrations playing out nightly become more than a historical flash in the pan, Floyd’s killing will be recorded as the spark that lit a tinderbox.
Racial disparities are particularly acute in Minneapolis.
As Christopher Ingraham writes, the city Floyd called home has one of the country’s more dramatic splits between haves and have-nots along racial lines. “The typical black family in Minneapolis earns less than half as much as the typical white family in any given year,” Chris wrote over the weekend. Indeed, the median black family in the city earned $36,000 in 2018, $47,000 less than the median white family, one of the largest such differences in the country.

And the income gap spills over a into wealth gap, Ingraham writes, as “homeownership among black people is one-third the rate of white families.
As a result, many black families have been effectively locked out of the prosperity the city’s overwhelmingly white population enjoys.” About a quarter of black Minneapolis families own their own home, one of the lowest such rates in the country, while the approximately three-quarters of white families there who own their homes represents one of the country’s highest rates:

The racial stratification in Minneapolis is extreme but hardly unique in the United States.
This chart, from research the Federal Reserve released in March, shows how white households have steadily accumulated wealth over the past three decades while black and Hispanic families saw only meager gains. It shows black families, while representing about 13 percent of the population, hold about 4 percent of the nation's household wealth.

Julia Coronado, president of MacroPolicy Perspectives and a former Fed economist, notes median net worth for black households is a tenth that of white households — a chasm explained in part by the relative fraction of black households that own their own homes and direct equity.
Avenues to wealth are not equal: 4.7% of black households held equity directly in 2016 as compared to 17.5% of whites (according to the Fed's SCF), home ownership is 44% for black hh and 73.7% for whites..3/n
— Dr Julia Coronado (@jc_econ) May 30, 2020
Relatedly, Coronado notes, black households are more vulnerable to economic shocks. And while educational attainment helps, black households still consistently lag behind their white counterparts in earnings as they climb that ladder.
Stratification economics discusses how this is a feature of our system, not a bug and access to education isn't the panacea many economists want it to be. Unequal policing and incarceration is a major issue here 5/n@DarrickHamilton @SandyDarity
— Dr Julia Coronado (@jc_econ) May 30, 2020
The pandemic and the shutdowns that followed consequently have hit minority populations especially hard.
The number of working black business owners, for example, plunged 40 percent since the shutdowns started, according to a recent analysis. That represents a significantly steeper drop-off than for active business owners overall, who have seen their ranks depleted by 22 percent. And though the federal government hasn’t been maintaining this sort of demographic data, analysts suspect minority business owners have received less than their fair share of relief funds from the Treasury Department’s Paycheck Protection Program.
Job losses similarly have fallen hardest on minority populations: 18.9 percent of Hispanic workers and 16.7 percent of blacks found themselves out of a job in April, compared to 14.2 percent of whites. “The pandemic is falling on those least able to bear its burdens,” Fed Chair Jerome H. Powell said Friday during a discussion hosted by Princeton University. “It is a great increaser of inequality. ”

Meanwhile, black people have made up a disproportionate share of fatalities from the disease itself. More than half of the nation’s recorded deaths have come from predominantly black counties, though those represent less than a quarter of all counties.
“Several structural factors converged to produce this high mortality rate,” Change Research analyst Laura Goldstein wrote last month. “Many impoverished black communities are considered 'food deserts,' with few grocery stores or other sources of fresh and affordable food; that contributes to high rates of obesity and diabetes, which can increase mortality risk for covid-19. Further, the legacy of racially biased economic policies means a disproportionate number of black Americans work in front-line service jobs and live in crowded rental housing, putting them at higher risk for encountering the virus.”
The issue is poised at least in the immediate run to dominate the presidential race. 
Former vice president Joe Biden, the presumptive Democratic nominee, made an unannounced visit to protesters in Wilmington, Del., on Sunday, and is planning to speak out on race in coming days, Annie Linksey and Cleve Wootson report.
President Trump, meanwhile, decided against addressing the nation on Sunday. The president “and some of his advisers calculated that he should not speak to the nation because he had nothing new to say and had no tangible policy or action to announce yet, according to a senior administration official,” Phil Rucker reports. Instead, Trump tweeted attacks on Democratic leaders, from Biden to state and local officials, and the media while advocating a tougher crackdown on protests from law enforcement.
Welcome to The Finance 202, our must-read tipsheet on where Wall Street meets Washington.

Protest fallout

Debris left by looters in a damaged Target store in Oakland on Saturday. (John Mabanglo/EPA-EFE/Shutterstock)
Target, Walmart and other retailers are temporarily closing stores.
In some places, stores have been looted, burned or both: “U.S. retailers large and small have closed some of their stores across the country,” the Associated Press's Dee-Ann Durbin reports. “Target, CVS, Apple and Walmart all said that they had temporarily closed or limited hours at some locations for safety reasons."
“Amazon said that it has adjusted its routes and suspended deliveries to keep its drivers safe in some cities, including Chicago, Los Angeles, Seattle and Minneapolis. A spokeswoman, Kelly Cheeseman, said Amazon is also abiding by local curfews that have required people to remain off streets after a specified hour at night."
  • The details: “At more than 200 of its stores, Target said it had either adjusted hours or temporarily closed over the weekend, though most of the stores were scheduled to reopen Sunday or [today]… Walmart said it closed hundreds of stores late Sunday afternoon to protect employees and customers. Scott Pope, a spokesman, said several dozen stores were closed all day because of damage from protests. He said he didn't know when those stores would be able to reopen.”
Financiers denounce racism: Executives at BlackRock, JPMorgan Chase, Citigroup, and Goldman Sachs all have put out statements denouncing racism in the wake of the protests, Barron's Ben Walsh reports. Some drew skepticism, including a LinkedIn post from Goldman Sachs CEO David Solomon:
From Gregg Gelzinis of the Center for American Progress:
Not a unique thought, but the "however" clauses in these statements are always more emphatic than what comes before.
It shows where their priorities lie.
— Gregg Gelzinis (@FinGregg) May 30, 2020
NFL Commissioner Roger Goodell accused of hypocrisy in protest response: “Critics pointed to the league's handling of Colin Kaepernick and his protest against police brutality in 2016, saying Goodell and the league had deliberately stifled Kaepernick and so had no right now to appear to be siding with protesters and their cause,” NBC News's Janelle Griffith reports.

Coronavirus fallout

A passenger wears personal protective equipment on a flight after landing at Minneapolis−Saint Paul International Airport on Thursday. (AP Photo/John Minchillo)
Cities face cutting essential services or taking on more debt: 
Shortfalls are hitting small towns and metropolises alike. "Nearly 90 percent of cities expect revenue shortfalls, according to a survey by two advocacy groups, the National League of Cities and the U.S. Conference of Mayors, which polled 2,463 cities and towns that are home to 93 million people,” the WSJ's Heather Gillers reports.
U.N. agency urges uniform approach to flying: “A United Nations aviation-led task force is urging airlines, airports and countries to come up with a uniform approach to flying safely during the pandemic, although it stopped short of providing specific requirements for the hard hit industry’s recovery,” Reuters's Allison Lampert and Tracy Rucinski report.
United Airlines cutting 13 top jobs but will add international flights next month:  “Chicago-based United said it is increasing trans-Atlantic service from Washington, D.C. and San Francisco to cities across Europe in July thanks to a modest rise in demand, and restarting service to Tokyo-Haneda, Hong Kong, Singapore and Seoul,” Reuters's Tracy Rucinski reports. 

When superpowers collide

A student gestures the "Five demands, not one less" protest motto during a lunchtime protest at a shopping mall in Hong Kong on Friday. (Lam Yik/Bloomberg)
U.S.-China disputes are stretching far beyond trade.
But Beijing has shown much less willingness to compromise beyond trade: “Unlike changing a calculus on trade where Beijing has consistently sold more to the U.S. than the other way around, resetting the Hong Kong ties will require Trump to execute policy tied to a range of American interests there like freedoms of speech, religion and expression now thrown into doubt by Beijing’s new law,” the WSJ's James T. Areddy and Chao Deng report.
“Beijing has engaged with the Trump administration on trade policy—signing an agreement in January to spend big on imports to appease the president—but is less likely to compromise on social policy that it says is a domestic matter. It could also be pleased with any steps toward U.S. disengagement with Hong Kong. U.S. options on Hong Kong are limited because action to cut links or hurt its local economy could backfire on a population that currently enjoys Western style freedoms, analysts said. A response should do ‘no additional, avoidable harm to the hard-pressed people of the city in this trying moment,’ according to Daniel Rosen, a partner at New York-based Rhodium Group.”
Beijing is pausing some ag purchases under the trade deal. “Chinese government officials told major state-run agricultural companies to pause purchases of some American farm goods including soybeans as Beijing evaluates the ongoing escalation of tensions with the U.S. over Hong Kong, according to people familiar with the situation,” Bloomberg reports.
“State-owned traders Cofco and Sinograin were ordered to suspend purchases, according to one of the people, who asked not to be identified discussing a private matter. Chinese buyers have also canceled an unspecified number of U.S. pork orders, one of the people said. Private companies haven’t been told to halt imports, according to one of the people.”

Federal funds will be sought for factory building and research to keep the U.S. ahead of China and others generous in subsidizing their companies.

Market movers

Trader Eric Schumacher wears a bandana face mask as he works on the New York Stock Exchange trading floor on Tuesday. (Colin Zimmer/NYSE via AP)
U.S. stocks are outpacing the rest of the world.
This is isn't a recent phenomenon: “Investors point to a booming technology sector and an unprecedented amount of stimulus from the Federal Reserve as reasons for the outperformance. The percentage of fund managers who deem U.S. stocks attractive has risen to the highest level in nearly five years, according to a recent Bank of America Global Fund Manager Survey,” the WSJ's Karen Langley reports.
“The S&P 500 traded Wednesday at 21.85 times its expected earnings over the next 12 months, the highest level since June 2001, according to FactSet and Dow Jones Market Data. That compares with 18.24 times for the Stoxx Europe 600 and 10.70 times for the Hang Seng.”

Money on the Hill

The U.S. Capitol. (Patrick Semansky/AP)
Democrats continue to eye tax increases on wealthy and corporations.
The pandemic has not weakened the push: “Democratic lawmakers and policy aides worry little that planned tax increases on corporations and high-income households would hinder the economic recovery. If anything, they argue that economic disparities evident during the pandemic make these tax increases more necessary,” the WSJ's Richard Rubin reports.
“Biden’s tax proposals are modest compared with those of his former rivals for the Democratic presidential nomination. Unlike Bernie Sanders and Elizabeth Warren, he hasn’t endorsed imposing annual wealth taxes. Still, his proposals would undo major pieces of the 2017 tax law and raise taxes beyond what President Obama and 2016 nominee Hillary Clinton sought, generating $4 trillion over a decade. Republicans oppose those tax increases and will campaign against them, warning that they would slow growth and discourage investment … Pressed recently about whether he would delay tax increases while the economy is weak, Mr. Biden defended his proposals.”


  • Zoom Video Communications, Dick’s Sporting Goods, Cracker Barrel Old Country Store and Lands’ End are among the notable companies reporting their earnings, per Kiplinger.
  • Govs. Gretchen Whitmer (Mich.), Jarad Polis (Colo.) and Asa Hutchinson (Ark.) testify in front of the House Energy and Commerce Subcommittee on Oversight 
  • Acting OMB director Russell Vought testifies in front of the Senate Homeland Security Committee during his confirmation hearing to become permanent director. 
  • The Senate Banking Committee holds a hearing on Title IV of the Cares Act aka the Treasury’s $500 billion funding pool 
  • The Senate Small Business Committee holds a hearing on covid-19’s impact on small businesses
  • Campbell Soup, Cinemark Holdings, American Eagle Outfitters and Vera Bradley are among the notable companies reporting their earnings

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