by The economic pain wrought by the Covid-19 pandemic has been unprecedented, with job losses far steeper than in any recession dating back to the 1980’s.
Unprecedented job losses for workers
There were 9.5 million fewer workers on payrolls in February 2021, than a year ago, before the pandemic took hold. At the current pace of job growth, according to a March 5 briefing by the Council of Economic Affairs, it would require more than two years of job growth just to get back to pre-pandemic levels. Over this same time period, more than 4 million workers have dropped out of the labor force. Official unemployment figures given in the mainstream press rarely cite the U6 measure of unemployment that counts these workers, and it is an open question as to how many of these people will ever return to work.
With Biden’s $1.9 trillion recovery plan and a few favorable economic indicators, it is tempting to assume the overall economy is well on its way back to pre-pandemic conditions. But what we are actually seeing is a “K-shaped recovery” – the unequal distribution of economic pains and gains. The K-shaped recovery essentially splits an economy in two, with winners and losers broken down economically and socially, exposing differences between industries, class, race and gender.
For people in upper income brackets, the pandemic recession caused little pain, especially once the initial shock passed. Roughly 86% of upper income adults report their finances are in good, or even excellent, shape. The same survey found this to be true as well for about 6 in 10 adults with at least a four-year college degree, white and Asian Americans, men and those who are 65 and older.
For the super-rich, the pandemic was a bonanza. After 11 months of misery, total US billionaire wealth increased $1.3 trillion since mid-March 2020, an increase of 44 percent. As of February 19, the country’s 664 billionaires now have combined wealth of $4.3 trillion, up from just under $3 trillion since last March. An earlier report by Swiss bank UBS found that billionaires increased their wealth by more than a quarter (27.5%) just during the height of the crisis from April to July. According to a recent Oxfam report, the world’s 10 richest billionaires have collectively seen their wealth grow by $540 billion over this period. UBS reported that billionaires’ wealth had hit “a new high, surpassing the previous peak of $8.9tn reached at the end of 2017.”
Part of this meteoric increase in billionaire wealth came from the recovery of global stock markets from their nadir in March and April. The S&P 500 is up more than 65% since the March low and closed 2020 with a 16.3% gain for the year. The Nasdaq is 44% higher for the year, posting its best one-year performance since 2009. Tech was by far the dominant sector in 2020, surging more than 42% for the year, as the pandemic forced more people to work from home. This shift drove up demand for cloud services and computer equipment. Consumer discretionary spending, meanwhile, jumped 32.1% this year, boosted by more people shopping online. Amazon shares alone skyrocketed by 76.3% in 2020.
Although this surge was unprecedented, it is not unusual for financial markets to recover faster than the overall economy. This phenomenon simply underscores the fact that the market is a playground for the rich, who, despite a temporary dip in the economy, can invest large sums of money in stocks when they are at a low point, in expectation of gains as it recovers. Working people, having no such resources, are largely shut out of the global financial casino. In addition, with limited opportunities for productive investment, capital tends to flood into speculative markets, fueling massive bubbles, as it has in a section of the tech industry.
Job losses hit women and minorities hardest
Job losses in this recession present a vastly different picture from previous recessions. Job losses in low wage industries like restaurants, hospitality and retail went far deeper than in better paying occupations. Also, the changes in lifestyle — less eating out, less traveling, no live entertainment — have allowed some Americans to make their financial lives healthier. In a Associated Press-NORC Center for Public Affairs Research poll, roughly 4 in 10 Americans say they’ve been saving more money than usual and about 3 in 10 have been paying down debt faster than usual. The majority of jobs lost in the crisis have been in industries that pay low average wages, with the lowest-paying industries accounting for 30 percent of all jobs, but 58 percent of the jobs lost from February to December 2020, according to Labor Department employment data. Jobs in low-paying industries were down more than twice as much between February and December 2020 (11.3 percent) as jobs in medium-wage industries (4.9 percent) and nearly four times as much as in high-wage industries (3.0 percent). The leisure and hospitality industry alone accounts for around 36 percent of all jobs lost during the pandemic.
Official statistics published in the media rarely reveal the disproportionate effect of race and gender. A Council of Economic Affairs study indicated that the largest sections of workers who lost their jobs were Black and Latina women. Apart from job losses in the restaurant and hospitality sectors, women have also left the workforce in vast numbers to provide care for their children, especially during at-home virtual schooling, underscoring the traditional inadequate access to childcare in the U.S.
The intersection of class, race and gender are also illustrated by the unemployment crisis. Michelle Holder, an economist at John Jay College, noted that the two biggest sources of job losses among Black women have been cashiers at stores and restaurants, including fast-food, and in child care. Holder said she fears that many of those jobs likely won’t return, even as the pandemic fades, as some shifts in the economy become permanent.
For example, business travel is unlikely to return to previous levels as more meetings are conducted remotely. Many health care appointments are now held online, thereby reducing the need for some staff in doctor’s offices. The accumulation of these types of economic shifts may end a decade-long narrowing of the Black-white unemployment gap, given that many lower-paid jobs are disproportionately held by Black workers.
“There are significant changes coming in terms of where we work, what jobs will be available,” Holder said. “All this will hit women, low-wage workers and people of color.”
Hunger, unpaid rent and utility bills stalks the poor
Between past due rent, late fees and unpaid utility bills, Americans owed $70 billion by the end of January, when the federal eviction moratorium was originally set to expire. Back rent owed by about 11.4 million renters averages about $6,000 per household, or around three-and-a-half months’ rent, according to Moody’s Analytics.
According to a report by Feeding America, at least 35 million people faced hunger in the US before Covid-19, including more than 10 million children. But with the pandemic, 18 million more children could become food insecure, bringing the total to more than 52 million people in the country. Although this can be explained in part by low wages and job losses, many children lost access to free school lunches, as K-12 schools have been shut down. And, a recent survey found some 22 million adults — 11 percent of all adults in the country — reported that their household sometimes or often didn’t have enough to eat in the last seven days, according to Household Pulse Survey data collected March 3-15. This was far above the pre-pandemic rate of 3.4 percent. Black and Latino adults were more than twice as likely as white adults to report that their household did not get enough to eat: 20 percent and 19 percent, respectively, compared to 7 percent of white adults.
The Biden plan will help, the question is how much?
The American Rescue Plan Act, as the Biden recovery plan is officially named, is projected to dramatically reduce poverty and narrow disparities by race – at least for the year ahead. Even a temporary reduction in hardship, particularly among children, would be a welcome step forward. The latest stimulus will reduce poverty by a third, lifting nearly 13 million Americans out of it, according to an analysis by Columbia University’s Center on Poverty and Social Policy. Black Americans, Hispanic Americans and poor families with children are set to benefit the most. Child poverty would be reduced by more than half, the researchers predicted. Evidence from the Center for Budget and Policy Priorities suggests that reducing childhood hardship and poverty would yield improvements in education and health, higher productivity and earnings, less incarceration, and other lasting benefits to children and society.
Yet, the temporary character of the Biden stimulus means many of these gains could be quickly reversed. In a recent Pew Research Survey, 44% of respondents say it will take them three or more years to get back to where they were financially from when the pandemic started, and one in ten said they would never get back there.
Another question to think about when the country’s economy would get back to normal is: what is normal? As Fed Chair Janet Yellin said in a message to her department’s staff recently, “People worry about a k-shaped recovery to the pandemic — and that is a cause for concern — but long before Covid-19 infected a single individual, we were living in a k-shaped economy, one where wealth built on wealth while certain segments of the population fell further and further behind.”
A substantial indicator of that racialized economic disparity was home ownership – 75% for whites, only 44% for Black people, according to Census Bureau figures. Wage inequality has been rising since the late 1970s in America, as the post-war economic growth burst slowed down. Since the turn of the millennium, wage growth has been strongest for higher-wage earners, according to the Economic Policy Institute.
So while stimulus checks and aid for the unemployed (many of them part of the rising percentage of long-term unemployed) and assistance to families will be welcome, lasting improvements in living standards will require sustained mass struggle. Despite the extraordinary stimulus in response to the immediate crisis, without pressure from below we should not expect the Democratic Party leadership to take serious measures to increase in the minimum wage, expand unionization, or to block the tsunami of evictions when Federal and State moratoriums end. As we outline in other material, the role of socialists in building a sustained mass fightback can make a decisive difference.
