What’s the color of the 2020 economy?
Pantone, the self- described “global color authority” announced its color of the year for 2021—actually, it was two colors: Ultimate Gray (a first for gray) and Illuminating, a yellowish, smiley face tone. The company notes that when the two come together, they “create an aspirational color pairing, conjoining deeper feelings of thoughtfulness with the optimistic promise of a sunshine filled day.”
I thought about these two colors after contemplating where the economy and markets stand as near the yearend. The pandemic economy itself has been both gray and yellow — and that will likely be the case until the spring of 2021. In fact, the stark contrast between the two is a perfect metaphor for the Kshaped, split screen economy, where the haves (those able to work from home), are feeling the “promise of a sunshine filled day”, while the have-nots (the unemployed, those who have lost hours or those that must stay home to care for children or other relatives) are suffering through a gray period that does not quietly assure or encourage “feelings of composure, steadiness and resilience.” Rather, the gray in this instance is just bleak and scary.
Pantone advises, “Ultimate Gray and Illuminating do not have to be used in equal proportions,” which also holds for the haves and the have-nots. Indeed, the COVID period is exacerbating the underlying trends of inequality that have been at play for decades. An analysis by Lawrence Mishel and Jori Kandra at the leftleaning Economic Policy Institute, focused on data from the Social Security Administration to find that over a forty-year period (1979-2019), the top 1% (2019 average of $758,434) saw their wages grow by 160.3%; and those in the bottom 90%had annual wages (2019 average of $38,923) grow by 26%. “These disparities in long-term wage growth reflect a major redistribution upward of wages since 1979.”
Is this a case of the rich getting richer? In part, yes, though when the analysis narrowed in on recent years, 2007-2019, which includes the Great Recession, the winners were not the 1%, whose wage share fell slightly. Rather, it was other high earners, “those earning between the 90th and 95th percentiles (2019 average of $129,998) and between the 95th and 99th percentiles (averaging $210,511 in 2019).”
In addition to income, another area where the top 10% could be feeling the sunny glow of Illuminating is housing. Low mortgage rates, soaring demand and low inventory have pushed up prices nationally, which means that anyone who owns a home has seen an increase in equity. On the other end of the spectrum, millions of households are falling behind on rent, just as the federal eviction moratorium is about to expire.
And then there’s the stock market, where optimistic investors have fully donned their Illuminating rally caps. Even before the red hot IPOs of Door Dash and Airbnb, which cast an eerie late 1999 tech boom spell on investors, the Bank for International Settlements issued a warning: stock prices have become detached from the real economy. BIS analysts raised concerns “about the daylight between valuations, which are still above or near their already stretched pre-pandemic levels, and economic prospects, which are still uncertain.”
Pantone calls Illuminat
ing “a bright and cheerful yellow sparkling with vivacity, a warming yellow shade imbued with solar power.” They are more optimistic than I am when they say Ultimate Gray is “emblematic of solid and dependable elements, which are everlasting and provide a firm foundation.” I hope that the optimistic version plays out in the economy, where gray feels like a fog that has descended on millions of Americans who are struggling to see the light.