Pandemic cuts cruel swath through economy
Just when it seemed some of the most disheartening trends in the U.S. economy were finally beginning to reverse, COVID-19 arrived to entrench them.
The pandemic has been a neutron bomb targeted at the prospects of lower income working people.
They had finally begun to benefit from the recovery from the Great Recession when the virus ravaged sectors of the economy that disproportionately employ them.
The pandemic has hammered restaurants, hotels and places of entertainment, all of which don’t pay high wages and tend to employ women and minorities. It has cut a swath through small business. It has slammed workers who can’t retreat to home offices for Zoom calls.
According to a Gallup Poll earlier this year, 71% of people in the top income quintile said they were working from home, whereas 45% of people in the bottom quintile stayed at home and were unable to work.
A National Bureau of Economic Research working paper published in May found that workers in high-proximity jobs impossible to perform from home tend to be “less educated, of lower income, have fewer liquid assets relative to income, and are more likely renters.” Workers in such jobs were more likely to become unemployed, and non-college-educated workers experienced a 4 point larger drop in employment than college-educated workers.
Jobs at the top have bounced back since the spring and affluent people might have more wealth than ever, given the increase in home values and frothy stock market.
The story is different further down the income scale. According to The Washington Post analysis, Hispanic Americans experienced the sharpest loss in employment with the onset of the pandemic. The young were particularly hardhit; 20% of those ages 20-24 lost their jobs. Mothers with children ages 6-12, called upon to fill the gaps created by school closings, have been another hard-hit group.
Similarly, mom-and-pop businesses have fared poorly. A survey by Alignable, a small business social network, found nearly 50% of small businesses say they are generating less revenue than they need to stay in business, with travel businesses, gyms and beauty salons at particular risk.
The pandemic has torn apart what the long recovery since the Great Recession had slowly, too slowly, built.
Since 2010, a lion’s share of new jobs were created in the services sector, which has been shredded by the virus. In 2019, Black employment had hit record levels. It plummeted last spring. Positive trends in labor force participation have been stymied, with the labor force participation rate the lowest it’s been in about 50 years.
Mass vaccination next year should take the edge off of this economic dislocation, but it’s harder to create than destroy. The Federal Reserve estimates that employment won’t fully bounce back until 2023.
What is to be done? Policymakers need to realize that when they promulgate COVID-19 restrictions, they are asking the people with the least economic margin for error to sacrifice the most. Congress needs to pass a new stimulus bill to cushion the blow of a natural disaster that has immiserated many millions of people through no fault of their own. And the incoming Biden administration ideally would realize that fashionable causes like climate change need to take a back seat to the pursuit of full economic recovery.
The economic pain is not the worst that the pandemic has wrought, but it cannot be ignored.