U.S. Black-Owned Firms Make Surprise Comeback to Pre-Covid Level

U.S. Black-Owned Firms Make Surprise Comeback to Pre-Covid Level

Black-owned businesses, dealt a crippling blow in the first months of the Covid-19 crisis, have rebounded to their pre-pandemic numbers, according to research based on U.S. Census Bureau data.

The turnaround is a sharp contrast to April, when a 41% plunge in the number of active African-American business owners heaped more challenges on a community already facing outsize health problems. The rate of decline abated to 19% by June as the country reopened, but remained more than double that of White owners during the period.

As of last month, the number of Black business owners had climbed back to about 1.1 million nationwide, a 2% increase from February. Robert Fairlie, an economics professor at the University of California-Santa Cruz who collected the data, cautioned that the Census numbers fluctuate from month to month, so it’s possible Black owners didn’t see an absolute increase over the pre-pandemic period. Also, the data don’t address whether the owners are actually making money or not, he said.

U.S. Black-Owned Firms Make Surprise Comeback to Pre-Covid Level

Beyond the caveats on the lumpy data, the reasons behind the surprising recovery are uncertain. The movement to support Black-owned businesses that sprung up during nationwide protests over police brutality may have been a contributing factor, according to Fairlie. Many African-American entrepreneurs noted a surge in business over the summer.

“The rebound might be due to a concerted effort by customers to buy from Black-owned businesses,” Fairlie said by email. “I’m not sure if this explains everything, but it certainly helped.”

It wasn’t immediately clear whether the turnaround comes from reopenings of existing businesses or new firms being creating at a faster pace than permanent closures. One possible explanation is the recent spike in entrepreneurship in the country. New business formation filings with the IRS climbed 77% in the third quarter when compared with the previous three months, and they were up 82% from a year earlier, federal data show.

Latinx business owners also saw a rebound in September, with their numbers up 1% from February after dropping as much as 32% in April, according to Fairlie’s research.

But the recovery is uneven across racial and ethnic groups, Fairlie’s data show. The number of White business owners was down 1% in September. And immigrants and Asians are still seeing sharp declines, with their ranks still down 13% and 17%, respectively, compared with February.

©2020 Bloomberg L.P.