The numbers tell us the Economy is better, but millions of Americans aren’t feeling it

The United States economy has kept growing despite a summer spike in covid cases and the end of massive federal aid, but millions of Americans are being left behind. With the fall approaching, the broader economy has performed better than expected. Hiring has increased, consumer spending has been steady, manufacturers are still on an upswing, and demand for homes and new cars has been surprisingly strong.

The data shows an increase in retail sales in August 2020 as well as improved production among manufacturers in September 2020, suggesting a recovery is still ongoing. Yet a new divide has emerged between the haves and have-nots, with the have-nots the ones whose livelihoods has been most disrupted by the covid pandemic. The unemployment rate among banks, insurers, Wall Street brokerages, and other companies involved in the handling of money was just 4.2% in August 2020.

That is not much higher than the national rate of unemployment shortly before the pandemic struck in March 2020. By contrast, the unemployment rate for companies involved in travel, hotels, dining out, and other forms of leisure and hospitality stood at a stunning 21.3% in August 2020. These jobs tend to pay far less than professional work in fields such as finance and technology.

Many of the key economic reports on the economy, however, tell us very little about this divide.

Retail sales and consumer spending, for example, have been stronger than expected. What the reports most likely reflect are the habits of high-income earners with secure jobs who are working from home. The high-income earners can afford to spend, and that is what they are doing. High demand among these high-income earners helps explain strong sales of homes and autos.

And the high-income earners have even more reason to spend given a massive rebound in the stock market that has pushed their net worth close to pre-pandemic levels. It has long been an industry maxim that the 20% of wealthiest Americans account for up to 80% of all discretionary spending. If that is the case now, the high-income earners are making the recovery look better than it is.

The millions of Americans who are still out of work have no such luxury, especially after the expiration of an extra $600 in federal unemployment benefits in July 2020. It is a significant loss for the people who are no longer getting the federal unemployment benefits. The loss of income for these Americans, and devastation caused to airlines, hotels, restaurants, and retailers, could eventually filter into the broader economy.

Just September 2020, a hoard of major airlines, hotels, mall operators, and others have announced they will permanently cut more jobs unless Washington provides additional aid.

United States unemployment benefit claims have risen for four straight weeks, potentially another warning sign of trouble ahead. The Federal Reserve, meeting this week to evaluate the economy, is still worried enough that top central bankers continue to plead for more financial relief from Congress. Normally very reticent to give lawmakers advice, the Fed has been surprisingly vocal because it worries the recovery will flag unless Congress puts more wind at its back.

The wildfires in California, the state with the nation’s largest economy, is not helping. The fires have displaced many people and caused applications for unemployment benefits to spike. So far nothing has changed in Washington, though. Democrats blocked a “skinny” Republican bill last week that would have provided somewhat more aid for the economy. Democrats want a much larger spending bill that Republicans have resisted.

With the pivotal 2020 election looming in November, the odds of another major financial-aid package appear to be diminishing by the day. Perhaps the only thing that will get Congress to act is a sudden downturn in the recovery. It did not happen in August 2020 however, and it does not look like the economy will suddenly peter out in September 2020 either.

As hard as it would have been to believe a few short weeks ago, it now seems entirely believable that the United States is headed into the election with no new measures.

A pandemic-fueled tech stock surge has led to a reshuffling at the top of the United States billionaires list. MacKenzie Scott, a novelist and philanthropist who recently divorced Amazon founder Jeff Bezos, is now the wealthiest woman in the world, with a net worth of over $66 billion. Tesla CEO Elon Musk overtook Facebook CEO Mark Zuckerberg to become the third-richest man in the world, after Jeff Bezos and Bill Gates, with a net worth of $115 billion.

Since pandemic lockdowns started in March 2020, the combined United States billionaire wealth has grown by nearly $800 billion, or over 25 percent. As part of her divorce, Scott got a 4 percent stake in Amazon, whose stock has been rising as covid-induced lockdowns propel online sales and home deliveries. Shares have risen from nearly $2,000 to $3,500 since the start of 2020.

Tesla shares rallied after a stock split that took effect on Monday August 31st 2020, and have soared by 500 percent this year. Retail investors on low-cost, low-entry platforms such as Robinhood have also made the stock a favorite. Musk’s personal fortune has tripled since March 2020, the beginning of the pandemic shutdowns. As part of a recently negotiated pay package, Musk’s board will give him another $50 billion if he meets all of a set of agreed-upon performance goals.

It has been a wild and crazy carousel at the top of the billionaire index.

The blistering pace of wealth accumulation comes in sharp contrast to the economic devastation that millions of Americans at the other end of the spectrum are facing. The Federal Reserve estimated that net household worth fell by a record 5.6 percent in the first three months of 2020, the biggest single-quarter decline since the 1950s. With unemployment at 10.2 percent, more than 1 million people a week still filing for first-time unemployment benefits.

Lawmakers are at a stalemate over additional emergency aid. Some Americans have turned have turned to crowdfunding to keep their stores open, pay for medical procedures, and even funerals. Nearly half of American households are going hungry, and food pantry demand is up by 20 percent since the beginning of the pandemic. In addition, an estimated 40 million Americans could potentially be turned out of their home in the coming months.

President Donald Trump said that the Centers for Disease Control and Prevention (CDC) would use its authority to halt evictions through the end of the year. The growth in billionaire wealth, alongside the collapsing health and fortunes of most working class and low income households, is grotesque and unseemly. While Musk has dismissed covid restrictions as fascist, he wants to sell almost all physical possessions, and has complained that the Tesla stock price is too high.

Scott is one of the billionaires to have signed “The Giving Pledge”, a commitment to donate the majority of their wealth.

Out of her over $60 billion net worth, Scott recently gave $1.7 billion to a plethora of nonprofit organizations and historically black colleges. In August 2020, Wall Street rewards big-box stores for their monster sales volumes during the pandemic economy, propelling retail stocks such as Target to a record high this week. On the other hand, thousands of American small businesses are still hanging on by a thread.

The widening gap between retail giants and smaller stores is underscoring the pandemic’s effect of driving a wedge between the haves and have-nots across the industry. Target is sharing second quarter results that are, by virtually any measure, exceptional. Target’s online sales soared by 24 percent during the quarter ending August 1st 2020, compared to the same time last year.

Target also grabbed $5 billion in additional market share in the first half of the year. Online sales at Lowe’s jumped by 153 percent. Walmart saw a 97 percent increase in online sales during the quarter compared to the same time last year. Home Depot reported a 23 percent surge in sales, fueled by people looking to improve their space while stuck at home.

With covid cases continuing to rise in parts of the country, people are not venturing out to shop as much as they did before.
Staying home caused a blow to mall retailers and small businesses that were not categorized as essential services during the initial days of covid. What used to happen before the pandemic is people used to shop at different stores for different products, and that has been disrupted because they do not want to go outside. The stores that people do visit are the ones that are capturing more of consumer spend, and Target and Walmart have really benefited.

But as big-box retailers gain from people consolidating their shopping carts at one of their hundreds of chain stores, small businesses have struggled to survive. Far more small-business owners experienced lower sales from May to July 2020 compared to the prior three months. Sales at small businesses stand at negative 28 percent, down nine points from May 2020 when it was at net negative 19 percent.

There is no comprehensive data on how many small businesses have closed since the pandemic. But from March 1st to August 11th 2020, about 155,000 business shuttered. Roughly 91,000 of the closures are permanent. Total number of small businesses that will file for bankruptcy this year could increase by 36 percent from last year. Some of these small businesses did all right.

The federal government’s Paycheck Protection Program was designed to offer a lifeline to small businesses by covering the cost of their staff.

With more than half the country’s workers employed by small businesses, the program aimed to protect employees who faced unemployment if those businesses were forced to close. But the program has been riddled with controversy, and many business owners failed to receive funding. There is a downturn in job development for the last couple of months, however we are seeing further recovering in the labor market.

Even more surprising was the fact that covid-sensitive sectors were amongst the fastest growing markets in July 2020. The near-term outlook for the labor market and the economy will be extremely dependent on fiscal policy. If a portion of the jobless do not end up in a more permanent form of employment, the economy recuperation is going to be much slower.

The economy recovery did not stop, however it slowed. The July 2020 jobs report beat expectations, saying that United States employers added 1.8 million jobs throughout the month which the unemployment rate reduced to 10.2%. Financial experts had expected to see 1.5 million jobs added, with unemployment at 10.5%. While favorable, the report likewise suggested that the labor-market recovery from the covid recession was losing speed.

The July 2020 figure was much lesser than the 4.8 million jobs included in June 2020 and the 2.7 million added in May 2020.

The speed of economy development has decreased and we are still far from any sort of healthy labor market today. Work remains down 12.9 million jobs from its pre-pandemic February 2020 level, indicating that just about 42% of the jobs lost during the crisis have actually been recuperated. The cumulative hit to unemployment and the new unemployment rate were still worse than the Great Recession.

The report indicated progress in the labor-market recovery from the covid recession, however it also signaled that the pace of the economy recovery is slowing. Early in the crisis, job losses were because individuals stayed in business that were reticent to engage in consumption or financial investment. Now it is a broader, more systemic economic damage than simply the public health.

There is a need to raise economy development, however there is no sign that it is fast enough. The next couple of months are a race against the clock. Today’s jobs report comes at a vital juncture. It is the very first jobs report to catch the impact of pandemic on American employees and accompanies Congressional settlements on monetary relief for millions of Americans.

And with less than 3 months until the election, attention on the coming jobs reports will likely heighten.

The July 2020 jobs report increases the pressure on policymakers to extend financial relief to prevent the downturn from developing into a full-blown double-dip recession. This was a huge chunk of jobs that we got back. It would be an unimaginable gain before the pandemic. Still, there are some other factors to consider. One is that you need to ask how sustainable these gains are.

The path ahead is most likely to be bumpier, and depending upon the part of the economy you are concentrating on, you are probably going to see a bit of a different story.