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How Difficult Will Economic Recovery Be for LMI Communities?


Wednesday, April 28, 2021
Federal Reserve System Report COVID-19's Impact on Communities

Barriers and Opportunities
Read related analysis of survey results: COVID-19-related relief efforts were significant, but funding access and program capacity were challenges.

By Nishesh Chalise and Violeta Gutkowski, Institute for Economic Equity

This post is the second in a two-part series analyzing data from the surveys, Perspectives from Main Street: The Impact of COVID-19 on Low- to Moderate-Income Communities and the Entities Serving Them. We broke down the survey data by geography (urban and rural) and by race and ethnicity to show how the economic disruption varied. The first post discussed what the economic impact was for different communities. This post analyzes how severe the impact has been for different communities and how long recovery is expected to take.

The disruption to all communities from the COVID-19 pandemic is concerning, yet the disparities among communities of color are alarming.Respondents were asked: At this point in time, what level of disruption is COVID-19 having on economic conditions for the people and communities you serve? Not only have communities of color been disparately impacted with higher rates of COVID-19 cases, hospitalizations and deaths, but early evidence suggests the economic recovery may be unequal as well, according to Centers for Disease Control data, and a November report from the Center for Law and Social Policy. Similarly, rural communities saw an increased number of cases and were considered highly vulnerable, according to a December Urban Institute blog post and the CDC vulnerability index.

Perspectives from Main Street Surveys and Respondents

The community development functions of all 12 Reserve banks within the Federal Reserve System and the Board of Governors surveyed representatives of nonprofit organizations, financial institutions, government agencies and other community organizations. The most recent version of the survey was conducted between Oct.7 and Oct. 16 and received 1,127 responses.

According to the responses to the October survey:

  • About a third of the entities served primarily rural areas, whereas half of the entities served primarily urban areas.
  • Of the entities serving primarily rural areas, 9% served Black communities, 8% served Hispanic communities and 76% served white communities.
  • Of the entities serving primarily urban areas, 38% served Black communities, 19% served Hispanic communities and 32% served white communities.
  • Regardless of geography or demographic served, approximately 50% of the entities were nonprofit organizations.

Respondents were able to select all the areas in which they serve, including rural, suburban and urban, and to rank them. An entity primarily serving a rural area ranked “rural” as No. 1.

An entity was referred to as serving a particular community if the respondent reported that the low- to moderate-income (LMI) population the entity served was made up of at least 50% of that demographic group. The values do not add up to 100% because of the incorporation of additional ethnic groups.

Disruption and Recovery in Black and Hispanic Communities

From the Perspectives from Main Street October survey results:

  • About 90% of the respondents serving Black or Hispanic communities said that disruption in those communities was significant, with approximately 70% expecting recovery to be difficult.
  • Comparatively, less than 70% of entities serving white communities considered the disruption to be significant, with 45% saying recovery was likely to be difficult. (See Figure 1.)

Lower Levels of Disruption Were Reported for Rural and White Communities

Figure 1

Stacked bar chart showing levels of disruption for rural and white communities

SOURCES: The October 2020 (PDF) iteration of the Perspectives from Main Street: The Impact of COVID-19 on Low- to Moderate-Income Communities and the Entities Serving Them surveys and authors’ analysis.

DESCRIPTION: The bar graph reflects the levels of disruption from the pandemic for LMI communities, from “no disruption” to “significant disruption, expect recovery to be difficult.” The y-axis shows the percentage of survey respondents who reported the levels of disruption. About 90% of the survey respondents whose organizations serve primarily Black or Hispanic communities said that disruption in those communities was significant, a figure that includes those who expected recovery to be difficult and those who anticipated a quick recovery. That compares with 70% of the entities serving primarily white communities saying disruption was significant.

With respect to recovery,Respondents were asked: Starting from today, how long do you expect it will take for the people and communities you serve to return to the conditions they were experiencing before the impact of COVID-19? the data suggest that organizations serving Black and Hispanic communities expect longer recovery times than white communities. (See Figure 2.) These results are consistent with findings in an April 2018 issue of the U.S. Bureau of Labor Statistics’ Monthly Labor Review showing that the unemployment rates for Black and Hispanic populations took a bigger hit and had longer recoveries after the financial crisis than those for non-Hispanic whites.

Longer Recovery Times Were Expected for Black and Urban Communities

Figure 2

Stacked bar chart displaying recovery times for Black and urban communities

SOURCES: The October 2020 (PDF) iteration of the Perspectives from Main Street: The Impact of COVID-19 on Low- to Moderate-Income Communities and the Entities Serving Them surveys and authors’ analysis.

DESCRIPTION: The bar graph reflects expected recovery times from economic disruption from the COVID-19 pandemic for LMI communities, from less than three months from the date of the survey to more than 12 months. The y-axis shows the percentage of survey respondents who reported the expected recovery times. More than 60% of responses from organizations serving urban communities claimed that recovery would take at least 12 months from the time of the survey. The percentage was similar for respondents from organizations serving Black communities.

Organizations serving LMI communities had a similar story. The pandemic disruption was called significant by 43% of entities serving predominantly white communities.Respondents were asked: At this point in time, what level of disruption is COVID-19 having on the entity you represent? The numbers went up to 60% and 52% for entities serving Hispanic and Black communities, respectively.

When asked about financial distress for their own organizations,Respondents were asked: Given your existing resources, how many months can the entity you represent operate in the current environment before exhibiting financial distress (including reducing services, laying off staff, closing locations)? 46% of entities serving white communities noted that the organizations were either in no financial distress or could sustain themselves for more than a year after the survey period, but the number went down to about 30% for entities serving Black and Hispanic communities.

Organizations Serving Urban Areas Report Higher Levels of Disruption

Urban and rural responses also show unequal disruption and recovery. While more than 70% of responses from entities serving urban areas said disruption was significant, with recovery expected to be difficult, less than 50% of the responses from entities serving rural areas said disruption was at that level. Additionally, 30% of rural area responses said that there was some disruption but that it was manageable, while only approximately 10% of responses from urban areas said the same. (See Figure 1.)

Similarly, more than 60% of responses from entities serving urban communities claimed that recovery would take at least 12 months from the time of the survey, while 45% of responses from entities serving rural areas said the same. (See Figure 2.)

These results stand in contrast to findings that suggest recovery after the financial crisis, especially in terms of job growth, was significantly better in urban areas. However, some evidence shows that rural areas have better small business survival rates, as can be seen in a PBS Newshour March 2017 article and a Center for American Progress July 2019 article.

The Pandemic Had a Disparate Impact

Multiple sources of evidence, in addition to the Perspectives from Main Street survey, make it clear that the pandemic has had a disparate impact on communities of color. The effects of the pandemic have been felt by all, yet it is clear that Black and Hispanic communities have not only felt the brunt of the impact, but may face a more difficult and a longer road to recovery.

We acknowledge the efforts of our survey respondents, who are on the front lines serving LMI communities.

Notes

  1. Respondents were asked: At this point in time, what level of disruption is COVID-19 having on economic conditions for the people and communities you serve?
  2. Respondents were asked: Starting from today, how long do you expect it will take for the people and communities you serve to return to the conditions they were experiencing before the impact of COVID-19?
  3. Respondents were asked: At this point in time, what level of disruption is COVID-19 having on the entity you represent?
  4. Respondents were asked: Given your existing resources, how many months can the entity you represent operate in the current environment before exhibiting financial distress (including reducing services, laying off staff, closing locations)?
ABOUT THE AUTHORS
Nishesh Chalise 

Nishesh Chalise is the director of Community-Based Policy and Analysis within the Institute for Economic Equity at the St. Louis Fed.

Violeta Gutkowski 

Violeta Gutkowski is a lead analyst within the Institute for Economic Equity at the St. Louis Fed.

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