Pandemic Underscores Inequality

Analysts and investors like to use letters to describe the condition of the U.S. economy and markets. V-Shaped, which is a sudden drop followed by a surge; W, the ultimate fake out, where output sinks, rises and then falls again; U, where after a sudden shock, the economy meanders and then starts to rise; and then the dreaded L, a drop, followed by a sluggish, sideways economy that never returns to its previous glory days. (One more that is fun for math geeks is the square root, where output drops, rises and then levels off.)

But as I prepared for a recent television segment on income inequality, I am considering the K-shaped recovery. The sudden stop in the economy impacted the entire country, as jobs vanished and the stock market crumbled. Then fortunes diverged: white collar workers who could stay at home and continue to earn money were doing pretty well, as were their retirement accounts; while tens of millions of non-essential service and gig workers were sidelined (a staggering 32 million Americans are currently receiving unemployment benefits.)

If the pandemic has acted as an accelerant to business trends, it has also become an accelerant to inequality. Last year, before the onset of coronavirus, the Census Bureau found income inequality was at its highest level in 50 years, with two-thirds of the total wealth in the country owned by the richest 5-percent. Meanwhile, 4 out of 10 American adults said they would have difficulty covering a $400 unexpected expense, more than 38 million Americans are living in poverty, and more than 14 million children went hungry last month.

When discussing these facts and figures, it is important to remember that there are people behind the numbers. I hear from them every day, as they struggle to find their footing on an economy that feels like quick sand.

They are fearful of what happens when the government’s $600 weekly unemployment benefit expires at the end of the month (former Federal Reserve Chair Janet Yellen, who along with her predecessor in the role, Ben Bernanke, testified before the Select Subcommittee on the Coronavirus Crisis on July 17th. She said that it would be a “catastrophe” if Congress decided not to continue its enhanced unemployment insurance that is due to expire at the end of this month); and how they will cope with demanding landlords and lenders when eviction moratoriums and forbearance arrangements sunset.

They care little about technology stocks reaching new highs and mortgage rates dropping to new lows. They simply want to know how the richest country in the world will help take care of those, who through no fault of their own, are struggling.