The New York Stock Exchange (NYSE) in Lower Manhattan.
Spencer Platt | Getty Images
The legacy of 2020 will endure in America’s collective memory for many reasons: a deadly pandemic, a vicious presidential election.
It also brought about the worst recession in nearly a century, plunging millions into poverty and unemployment, and causing burgeoning inequality.
This financial pain has focused on specific groups, such as: These include ethnic minorities, women, low wage earners, those without a college degree, and service industry workers such as restaurant and retail jobs that require face-to-face contact. (These categories often overlap.)
“No pain at all”
To a certain extent, this dynamic plays out in all downturns. But the coronavirus-induced economic shock was unique in the way wealthy Americans recovered from the depths of the crisis.
For many of them, the recession ended months ago. They quickly recovered from lost jobs. Their wealth has never been higher when stock and property prices rose. Their disproportionate ownership of such assets means that other groups have little share in their wealth.
The result is a financial gap between having and not, which economists say has developed faster than previous downturns.
“The most marginalized groups are always the hardest hit,” said Wendy Edelberg, director of the Hamilton Project, an economic policy division of the Brookings Institution.
“But what is so unusual for many other groups isn’t that they are hit less – it’s that they don’t see any pain at all,” she said. “And they are fine.”
The different experiences of those above and below have led many economists to identify the recovery as a “K” shape.
This uneven financial pain, however, was undetectable in the early months of the pandemic recession.
Congress swiftly passed the CARES bill, a $ 2.2 trillion bailout package that supports household incomes with additional unemployment benefits and economic reviews.
Bill Clark | CQ Roll Call, Inc. | Getty Images
According to Harvard’s Opportunity Insights project, nearly 40% of the jobs for the low-paid were gone at the height of the crisis. But a $ 600 weekly increase in unemployment benefits has more than doubled household incomes for many of them.
The infusion of money helped lift millions out of poverty.
In June, there were almost 5 million fewer Americans in the ranks of the poor than there were at the beginning of the pre-pandemic year, according to researchers from the University of Chicago, the University of Notre Dame and Zhejiang University.
This may not have been the most uneven recession, but it was clearly the most uneven recovery.
Senior Economist at the Center for American Progress
But inequality blossomed as that aid dried up.
Almost 8 million people fell into poverty between June and November, the researchers found. They found that poverty rose each month during that time, and it rose most sharply among blacks, children, and those with a high school education or less.
Food insecurity has increased and more households are reporting that they are behind on bills like rent, federal data shows.
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“This may not have been the worst-case recession, but it was clearly the worst-case recovery,” said Olugbenga Ajilore, senior economist at the Center for American Progress.
The new year could lead to a recovery in household finances and a reduction in inequality. President Donald Trump has signed a $ 900 billion aid package that will provide families with additional unemployment benefits and stimulus checks of $ 600 per person through mid-March.
Unemployment and jobs
According to Opportunity Insights, jobs among the low-paid (who earn less than $ 27,000 a year) were still nearly 20% lower than before the pandemic by mid-November. Additional unemployment benefits expired months ago.
The unemployment rate for blacks remains above 10% and at 5.9% it is almost twice as high as that of whites. Those without a university degree are also more than twice as unemployed as those with a university degree.
The official unemployment rate among women is also artificially low – more than men, women have left the workforce entirely for childcare and other duties, said Edelberg, a former chief economist in the congressional budget office.
The rich thrive
According to Opportunity Insights, the highest earners (those who earn more than $ 60,000 a year) had fully recovered from their job losses by the end of August. By mid-November, they had about 1% more jobs than before the pandemic.
Wealthy Americans tend to suffer a financial blow from their wealth of assets – stocks and property prices, for example – and do not lose earned income during recessions, economists said.
But that wealth has proven resilient in the Covid downturn.
“That’s one of the things that make this recession so unusual,” said Edelberg. “For many people the crisis is over. It is invisible to them.”
Share prices (as measured by the S&P 500 Index) fell 34% from the market low on March 23 – the fastest decline of its kind in history. But they rebounded on their fastest clip ever, erasing the losses completely by Aug. 21, less than five months later.
The S&P 500 is up 67% from the market low. The index rose more than 15% in 2020.
Property prices rose nearly 15% in November year over year, according to the National Association of Realtors. (The group measures the median price, which is right in the middle of a range.)
Wealthy Americans are spending about 5% less money than they did before the pandemic, while the low-income earners spend about 3% more, according to Opportunity Insights. This suggests that the rich may increase their savings while others cannot.
“Low-wage earners]live from paycheck to paycheck, so whatever money they get they spend on bills and food,” Ajilore said. “High income [people] may be doing less recreational activities so they are holding back the money instead of spending it. “