Cars line up at the Athens County Fairgrounds in Athens, Ohio on December 19, 2020 to pick up boxes of groceries.
BRAD LEE | AFP | Getty Images
The US economy is on the mend. However, the uneven or K-shaped nature of the recovery persists.
Economic activity is on track to return to pre-pandemic levels by the summer, aided by the surge in vaccinations and state aid. The labor market is showing signs of improvement.
While these gains have been widespread, some groups – particularly low-wage workers – continue to struggle.
Employment down by 30%
According to Opportunity Insights, a joint project between Harvard University and Brown University, employment in the lower third of the workforce is still down 30% from the prepandemic. (Such workers make less than $ 27,000 a year.)
By comparison, the highest-paid workers (who earn more than $ 60,000 a year) have fully recovered their lost jobs, according to Opportunity Insights.
According to Betsey Stevenson, professor of public policy and economics at the University of Michigan, this slow comeback for the bottom tier is largely due to the concentrated pain in industries that employ low-wage workers.
“We still don’t eat out as much as we did before. We still don’t go to the gym as much in person as we do or travel as much as we do,” said Stevenson, a former chief economist with the US Department of Labor during the Obama administration.
More than 3 million leisure and hospitality jobs – for example in restaurants and hotels – have not yet returned. They make up more than a third of the 8.4 million jobs that have not yet been restored, according to the Bureau of Labor Statistics.
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Such jobs are disproportionately occupied by minorities and those without a university degree – which means that these groups continue to have problems, according to economists.
For example, the unemployment rate among Hispanic and black workers in March was 7.9% and 9.6%, respectively. For white workers it was 5.4%.
“We welcome that [economic] Make progress but keep sight of the millions of Americans who are still injured, including low-wage service workers, African Americans, Hispanics and other minority groups who are particularly hard hit, said Jerome Powell, chairman of the federal reserve, said the congress in March.
In most recessions, the economic recovery tends to be uneven. However, the Covid pandemic was unique in terms of the resilience of certain assets.
For example, share and property prices rose to record highs. Most of the financial benefits, according to economists, have gone to whites, wealthy, and college graduates who disproportionately hold such assets.
The same groups were also able to quickly regain their lost jobs and stash money in a closed economy due to lower spending.
The different nature of the recovery for those who were up and down caused many economists to say that it had a “K” shape.
“The stock market has appreciated; real estate prices have appreciated,” said Aaron Sojourner, labor economist and associate professor at the University of Minnesota. “The vast majority of Americans don’t get much of this, and the benefits are very concentrated.”
The S&P 500 share index rose by around 46% last year.
Whites own 89% of all stocks and mutual fund shares, compared to about 1% owned by blacks and 0.5% by Hispanics, according to the Federal Reserve. (Other groups were not identified.)
The Los Angeles County Regional Food Bank employees help distribute food in Willowbrook, California on April 29, 2021.
Frederic J. Brown | AFP | Getty Images
The dynamics are similar in terms of wealth and level of education.
Americans with college degrees own 83% of stocks and mutual funds, according to the Fed. This dwarfs the proportion of those with and without a university degree: 6.5% and 0.7%, respectively.
“The K-shaped recovery, there is some truth to it for me,” said Sojourner, a senior economist at the Council of Economic Advisers during the Obama and Trump administrations.
‘Hard to tell’
The K-shape is no longer as literal as it used to be. By and large, all groups are being lifted up by the improving economy, albeit at different speeds, economists said. However, it’s still synonymous with the uneven brushstroke of restoration, they said.
And there will always be individual exceptions to these statistics that represent the overall experience.
Public order has also helped cushion the financial blow to the families affected. The federal government has pumped trillions of dollars in relief supplies to prop up households in the face of unemployment, eviction and food insecurity.
“There were [unemployment insurance] Expansions and the like, and that will have made up a significant amount of those income losses, “said Stan Veuger, an economist at the American Enterprise Institute, a right-wing think tank.
However, some people are falling through cracks in the U.S. safety net and not benefiting from these expansions, he added.
The different experiences are likely to improve as the economy continues to improve, economists said. However, they warned that further recovery will largely depend on vaccinations and how quickly the coronavirus is fought.
“It is very difficult to say what will happen,” said Sojouner.