The New York Stock Exchange (NYSE) in lower Manhattan.
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The legacy of 2020 will be etched in the collective American memory for many reasons: a deadly pandemic, a brutal presidential election.
It also caused the deepest recession in nearly a century, which pushed millions into poverty and unemployment and created growing inequality.
This financial pain has been concentrated among certain groups, such as racial minorities, women, low-wage earners, those without a university degree, and workers in the service economy, such as restaurant and retail jobs that require in-person contacts. (These categories often overlap.)
‘No pain at all’
To some extent, this dynamic plays out in all downturns. But the economic shock fueled by the coronavirus has been singular in the way rich white Americans have rebounded from the depths of the crisis.
For many of them, the recession ended months ago. They quickly recovered the lost jobs. Their wealth has never been higher, as stocks and house prices have soared. Their disproportionate ownership of these assets means that other groups have shared their wealth little.
The result is a financial chasm between the haves and have-nots that has arisen faster than previous downturns, economists say.
“The most marginalized groups are always the hardest hit,” said Wendy Edelberg, director of the Hamilton Project, an economic policy arm of the Brookings Institution.
“But what’s so unusual is that for a lot of other groups, it’s not that they’re less affected – it’s that they don’t feel any pain,” she said. “And they’re doing fine.
The divergent experiences of those at the top and the bottom have led many economists to identify the recovery as having a “K” shape.
But this uneven financial pain was not apparent in the early months of the pandemic recession.
Congress quickly passed the CARES Act, a $ 2.2 trillion relief package, bolstering household incomes with additional unemployment benefits and stimulus checks.
Bill Clark | CQ-Roll Appeal, Inc. | Getty Images
Nearly 40% of jobs had evaporated for the lowest incomes at the height of the crisis, according to Harvard’s Opportunity Insights project. But a $ 600 weekly increase in jobless benefits more than doubled household income for many of them.
The cash injection has lifted millions of people out of poverty.
In June, there were nearly 5 million fewer Americans among the poor than at the start of the year, before the pandemic, according to data released by researchers at the University of Chicago, University of Notre Dame and Zhejiang University.
But inequality flourished as that aid dried up.
Nearly 8 million people fell into poverty between June and November, according to researchers. Poverty has increased each consecutive month during this period, they found, increasing especially for blacks, children and those with a high school diploma or less.
Food insecurity has increased and more households are reporting they are behind on bills like rent, federal data shows.
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“It might not have been the most uneven recession, but it was clearly the most uneven recovery,” said Olugbenga Ajilore, senior economist at the Center for American Progress.
The new year could usher in sustained household finances and a reduction in inequalities. President Donald Trump signed a $ 900 billion relief plan into law, injecting families with additional unemployment benefits until mid-March and stimulus checks of $ 600 per person.
Unemployment and jobs
Jobs among the lowest earners (those earning less than $ 27,000 a year) were still down nearly 20% from pre-pandemic levels in mid-November, according to Opportunity Insights. Supplementary unemployment assistance expired months ago.
The unemployment rate for blacks remains above 10% and is almost double that of whites at 5.9%. Those without a high school diploma are also unemployed at a rate more than double that of those with a college diploma.
The official unemployment rate for women is also artificially low – women, more than men, have left the workforce entirely because of childcare and other responsibilities, said Edelberg, former chief economist at the Congressional Budget Office.
The rich prosper
Meanwhile, the highest-paying employees (those who earn more than $ 60,000 a year) had fully recovered from their job losses by the end of August, according to Opportunity Insights. As of mid-November, they had about 1% more jobs than before the pandemic.
Wealthier Americans typically suffer a financial blow through their wealth holdings – the prices of stocks and homes, for example – rather than the loss of employment income during recessions, economists said.
But that wealth has proven to be resilient in the Covid slowdown.
“This is one of the things that makes this recession so unusual,” Edelberg said. “For many people, the crisis is over. It is invisible to them.”
Stock prices (as measured by the S&P 500 Index) plunged 34% through the market low on March 23 – the fastest of its kind in history. But they recovered to their fastest ever clip, completely erasing the losses on August 21, less than five months later.
The S&P 500 was up 67% from the market bottom. The index increased by more than 15% in 2020.
Home prices also rose nearly 15% in November from the previous year, according to the National Association of Realtors. (The group measures the median price, which is the one that is right in the middle of a range.)
Wealthy Americans are also spending around 5% less money than before the pandemic, while those on the lowest incomes spend around 3% more, according to Opportunity Insights. This suggests that the rich may be increasing their savings, while others are unable to.
“Low wages]live paycheck to paycheck, so any money they get they’ll spend on bills, on food,” Ajilore said. “High income [people] maybe doing less leisure time activities, so instead of spending it, they are withholding that money. “