Map of US states: “Change in payroll employment in August from February 2020.”
10/5/20, “The Covid Economy Carves Deep Divide Between Haves and Have-Nots,” Wall St. Journal, Eric Morath, Theo Francis, Justin Baer, print ed., Mon., 10/6
“Comeback since start of pandemic [lockdowns] is kind to those who can work from home, to firms serving them and to regions hospitable to them. Many others are left behind.”
“A two-track recovery is emerging from the country’s [lockdown] pandemic-driven economic contraction. Some workers, companies and regions show signs of coming out fine or even stronger. The rest are mired in a deep decline with an uncertain path ahead.
Just months ago, economists were predicting a V-shaped recovery—a rapid rebound from a steep fall—or a U-shaped path—a prolonged downturn before healing began.
What has developed is more like a K. On the upper arm of the K are well-educated and well-off people, businesses tied to the digital economy or supplying domestic necessities, and regions such as tech-forward Western cities. By and large, they are prospering.
On the bottom arm are lower-wage workers with fewer credentials, old-line businesses and regions tied to tourism and public gatherings. They can expect to bear years-long scars from the crisis.
The divergence helps explain the striking disconnect of a stock market and household wealth near record highs, while lines stretch at food banks and applications for jobless benefits continue to grow.
In the latest example, consumer spending rose 1% in August but overall personal income fell 2.7% from July, in part because the unemployed received less government aid, according to Commerce Department figures reported Thursday.
Employers have added 11.4 million jobs since the start of May, and economists surveyed by The Wall Street Journal estimate gross domestic product rose at a 23.9% annual rate in the third quarter. That some workers, industries and regions are managing to power through the pandemic explains why growth is so strong.
Those gains still leave the country well short of where it started the year. The pandemic and lockdowns knocked out 22.2 million jobs in March and April and caused the economy to shrink at a 31.4% rate in the second quarter and a 5% pace in the first. The pandemic [lockdowns] has effectively erased all the economic growth of 2018 and 2019.
Even with recent gains, more jobs have been lost—nearly 11 million—than were cut in the wake of the 2007-09 recession, when 8.7 million were eliminated.
The gyrating numbers are a shock to a U.S. economy that had been averaging a little better than 2% annual growth for a decade. Together, the gains and losses show the economy at large is still in a hole after months of the fastest employment and output spurt on record, and could take years to fully dig out.
Still, many Americans who are working from home—along with those who serve them, from delivery drivers to home-improvement contractors—feel secure in their jobs, see retirement accounts still growing and are able to spend.
Businesses that serve those groups with increasingly digitized products are finding opportunity. For mostly white-collar industries, including information, management and professional services, economic output is poised to return to 2019 levels by the end of the year, some economists estimate.
While a K-shaped recovery appears to be taking hold, the economy’s path could shift….A persistent wave of corporate layoffs and bankruptcies infuse uncertainty into the U.S. outlook.
So does the threat that the damage for those on the lower arm of the K spills over to the rest of the economy in the form of reduced consumer spending and increased evictions and debt defaults.
Many lesser-skilled workers increasingly are finding that temporary furloughs have become permanent. Besides personal fallout from the cuts, economists worry about broader consumer demand.
“A lot of businesses weren’t affected or have returned to near-normal operations, but unemployment and underemployment remain extraordinarily high, and a lot of folks have nowhere near the income they had before the [lockdowns] pandemic,” said Carl Tannenbaum , chief economist at financial-services company Northern Trust. “That’s going to ripple throughout the economy.”
Workers
Just before the [lockdowns] pandemic, workers with historic disadvantages—including high-school dropouts, those with disabilities and Black and Hispanic workers—had seen their unemployment rates fall to the lowest on record as their pay rose. Women became the majority of workers on payrolls. The crisis hurt these groups disproportionately.
Black and Hispanic women held many of the restaurant, retail and hospitality jobs that were badly hit by lockdowns. Black women held 11.9% fewer jobs in September than in February, and Hispanic women held 12.9% fewer, according to the Labor Department. White men have been the group least affected, with 5.4% fewer jobs.
“Women of color are more likely to be breadwinners for their household” than white women, said Rebecca Dixon , executive director of the National Employment Law Project, which advocates for low-wage workers. “And it’s particularly devastating when the family’s breadwinner loses their job.”
By September, workers with bachelor’s degrees or higher had nearly fully recovered jobs lost in early spring. But those with just a high-school diploma held 11.7% fewer jobs in September than in February, according to Labor Department data, and high-school dropouts had 18.3% fewer. The two groups combined were down by 4.4 million jobs—amounting to around 40% of the employment that remains lost since the pandemic began—although they are only 27% of the labor force.
Some of the most secure jobs during the [lockdowns] pandemic are those that can be done remotely. More than 60% of management, business and financial jobs can be done from home, according to the Labor Department.
Nearly 30% of white employees held jobs they could do from home in 2017 and 2018, according to the department, compared to 19.7% of Black workers and 16.2% of Hispanic workers did.
The same Labor Department report found that 61.5% of the upper quarter of earners could work from home, compared with 9.2% of the bottom quarter.
Employers are hiring, but the pace has eased since June. If that continues, it would take several years for the U.S. to fully recover the jobs lost during two months this spring.
In April, nearly 90% of people who had just lost a job expected to return to it within six months, but by September only about half of recent job-losers did, according to the Labor Department.
And the laid-off are receiving less federal income support than they did earlier in the [lockdowns] pandemic. In addition to one-time $1,200 payments that many households received under the Cares Act, a federal stimulus bill in March added $600 a week to unemployment benefits paid by states. Those $600 payments ended in July.
In early August, President Trump issued an order letting states tap disaster-relief funds to pay $300 a week in enhanced aid for an additional six weeks. Debate continues on Capitol Hill about further aid.
Feeding America, an organization that runs 200 food banks, says 17 million more people lack consistent access to enough food compared to last year, a leap of nearly 50%.
By August, nearly 27% fewer people were employed in jobs paying less than $16 an hour, according to an analysis by Evercore ISI economist Ernie Tedeschi . Those included many jobs at restaurants, hotels and shopping malls.
But on the K-shaped recovery’s top arm, the U.S. had as many workers earning more than $28 an hour by August as before the pandemic—many working in white-collar sectors such as tech, finance and medicine.
The insurance, scientific research and investment industries, plus the category of information services that includes aspects of Facebook and Google’s operations, had by September recovered all the jobs lost since February, according to the Labor Department. Other enterprises adding jobs included home-improvement stores, couriers and e-commerce warehouses—businesses largely involved in selling to the people who never lost their jobs….
After a dip earlier in the year, total U.S. household net worth rose to a record level the second quarter, according to the Federal Reserve. The top fifth of income earners own about 71% of wealth in America, according to the Fed….
Industries…
Some industries have remained depressed, others were hit less hard or have seen substantial recovery and some have benefited.
At first, the pain was broadly spread. Business-to-business spending, a rough proxy for economic activity, was running nearly 14% below 2019 levels by May, according to data from Cortera, a firm that collects details on spending from millions of companies….
Companies
that operate through face-to-face transactions were at highest risk,
while those that could do business remotely were are more secure.
So, casinos and theaters saw business evaporate, the air-travel industry slashed spending by two-thirds, restaurants cut their spending by half and gas stations cut spending by a quarter as commuting fell. Manufacturing and railroads slowed sharply, as did oil and gas extraction.
The Palmer House Hilton hotel in Chicago now is facing a bank foreclosure. High-end New York restaurants Per Se and Eleven Madison Park remain closed. Exxon Mobil Corp. is expected to lose $1 billion this year. Department stores Neiman Marcus Group and J.C. Penney Co., which were already buffeted by internet shopping, sought bankruptcy-court protection in May….
As foot traffic evaporated, Chipotle Mexican Grill Inc. saw online orders more than triple in the second quarter, rising to 61% of total sales from about a quarter. The chain added staff and said it would include drive-through “Chipotlanes” at most new restaurants.
Lululemon Athletica Inc., after closing stores in the spring, was able to capture purchases by Americans working from home and eager for more comfortable “athleisure” clothing. The seller of high-end yoga pants embraced the shift to at-home fitness by buying Mirror, a start up that sells Internet-connected equipment and class subscriptions….
Spending by data hosting and processing companies rose 7% in April, from a year earlier, and slightly in May, as consumption of cloud services soared. Supermarket business thrived as families ate at home more and stockpiled staples. Electronics retailers saw business rise as people worked from home and went out for entertainment less.
Home-improvement chains like Home Depot Inc. and Lowe’s Cos. saw business soar as home-bound Americans went to work on their lawns and spare rooms and the housing market boomed. Walmart Inc. and rival Target Corp. recorded year-over-year sales jumps as Americans stocked up on essentials and turned to their e-commerce offerings. Amazon.com Inc. said last month that it would hire 100,000 more employees across North America.
In sectors on the upper arm of the K-shaped recovery—such as health care, financial and information—economic output is likely to surpass 2019 levels by the end of this year, according to Oxford Economics, a consulting firm. Construction and utilities aren’t far behind, it says.
But some types of businesses are unlikely to recover before 2024,the firm says, citing textiles and apparel, electrical equipment and appliance manufacturing as well as the petroleum, mining and coal industries. It could take until early 2022 for U.S. manufacturing to return to late-2019 levels, and until the end of next year for retailing and transportation, the firm says….
Analysts expect third-quarter profits for large publicly traded companies to come in about 22% below 2019 levels, compared with the second quarter’s 31% drop, according to Refinitiv, a data firm that compiles consensus profit forecasts.
Economic production,despite a sharp bounce-back in the third quarter, still resembles the depths of the 2008-2009 recession, at roughly 95% of where it stood going into the crisis, said Gregory Daco , Oxford Economics’ chief U.S. economist.
“Not many things are viable if they’re just at [95%] of the revenue they usually have,” he said, and if they are, “they’re usually viable with lower input costs—reduced workforces.”
That poses a risk for the economy in coming months, analysts say. Growth in demand could slow or even stall if many Americans lose federal aid and spend down their savings, and if better-off households slow the kind of spending the [lockdowns] pandemic prompted. The risk is that companies pull back on their own recovery plans, hiring more slowly or even initiating new layoffs—the hallmarks of a more traditional contraction.
“The risk is that…people don’t buy a third screen or don’t buy another desk, or they don’t order food out,” Mr. Daco said. ”We may not have seen all the pain from this recession.”
Regions
The [lockdown] pandemic’s economic effects ripple unevenly across geography, too.
Travel bans and worries about air travel have devastated destinations from Hawaii and Las Vegas to New York and Los Angeles, pinning tourism-dependent economies firmly on the recovery K’s lower arm.
Employment in Hawaii is down more than 16% since February, the worst of any state, according to the Labor Department. Hawaii’s leisure and hospitality employment remains less than half what it was before the [lockdowns] pandemic, said Carl Bonham , an economics professor and executive director of the University of Hawaii Economic Research Organization….
Florida, also tourism-heavy but less restrictive of business, has seen less job loss and faster recovery than states such as Hawaii. Orlando’s theme parks were able to open this summer, while Disneyland in California remains closed by government order. Florida’s August unemployment rate was right in the middle of the states at 7.4%. California’s 11.4% was fifth highest.
Among other states that set relatively light restrictions on businesses, Alabama, Georgia and Texas had unemployment rates below 7% in August, when the national rate was 8.4%. It fell to 7.9% in September….
The Northeast is home to many of the industries recovering best, such as finance and technology. Cities such as New York and Boston are flush with affluent and educated people who have generally fared well working from home.
Their absence is felt in business districts around office towers.The workers at downtown coffee shops and food trucks face severe challenges. There’s economic divergence not just among regions but within them.
Take the intersection of 42nd Street and Avenue of the Americas in midtown Manhattan, where Bank of America Corp. offices sit diagonally across from Bryant Park, said Mitchell Moss , a professor at New York University’s Robert F. Wagner Graduate School of Public Service. “At 6:30 p.m., you used to have 100 guys delivering dinner to those working late,” he said.
“We have no visitors and few workers,” he added. “Until we get one or the other back, it’s going to be a ghost town.”
Covid-19 [government ordered lockdowns] has also sped up a shift under way before the disease [lockdowns] appeared: the emergence of America’s Mountain West region, states such as Utah, Colorado and Idaho.
These lower-cost alternatives for industries such as technology and finance are on the recovery K’s upper arm, attracting a growing pool of young professionals.
“A combination of low costs, a strong workforce and high quality of life was already facilitating such a move. And if the appeal of big cities is diminished, it could hasten the flight to already-fast-growing regions,” Mr. Kamins of Moody’s said.”
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“D. Coleman
The lower half can vote out the politicians who destroyed their state’s economy by shutting it down for a virus no worse than a bad flu year. And the WSJ was instrumental in fanning the flames of hysteria – and still does it.”
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“Richard Crane
This is the shutdown economy, not the Covid economy. Stop ordering businesses to close and employment will improve.”
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“Dennis Healey
The biggest reductions in payroll happened in Nevada, Alaska and Hawaii due to drops in tourism. The other three biggest reductions are in California, Michigan and New York due to reactionary Democratic Governors.”
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“John Hawkins
Notice the complete lack of COVID Hospitalization data in this story….I guess we are supposed to have forgotten that the primary purpose of the lockdown was to keep the hospitals from being overwhelmed.….not to stop /eliminate the spread of the disease.
Every state I have looked at is showing a tiny fraction of COVID hospitalizations vs the peak yet the much anticipated narrative of the “second wave” is being spun up.….based on new infections” mostly in an age group that has a 99.999% survival rate
making a bad cold a worse experience. But hey the same publication
participated in a “fake” recession into the 2018 elections ….why not a
“fake” second wave.”
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“Frank Orlich
All government employees: The reason I was able to stay home during the pandemic [lockdown] is because I work for the government, they don’t expect much and others in the private sector were able to meet all my wants and needs.”
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Blog editor’s note: The two images in above comments were added by me.
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Added: Without lockdowns, Covid would’ve been over by early June 2020, per Imperial College model–BBC, 6/8/20...Trump followed Imperial College guidance in planning for intermittent lockdowns to last 18 months, 3/13/20 US 100 page plan:
BBC, June 8, 2020:
“The [Imperial College] model also predicted that the outbreak would be nearly over by now [June 8, 2020] without lockdown, as so many people would have been infected” leading to herd immunity.…
More than seven in 10 people in the UK would have had Covid, leading to herd immunity and the virus no longer spreading.”…
June 8, 2020, “Coronavirus: Lockdowns in Europe saved millions of lives,” BBC,
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Added: Ohio, June 29, 2020: Physician in Ohio freely admits the obvious: that lockdowns don’t stop the virus or save lives, they merely guarantee a longer life for the virus:
Dr. Thomas File: “While the state [Ohio] “flattened the curve,” the move pushed out infections for a longer period of time. [Are “infections” the same as positive “cases?”]
“This is still the first wave as you might consider it,” said Dr. Thomas File, an infectious diseases expert from Summa Health and the Northeast Ohio Medical University….
The elderly, especially those in nursing homes, remain the most at-risk group. The average age of death is 81, according the ODH reports. And about 90 percent of deaths involve patients over 60 years old….
“Ohio closed down most businesses in mid to late March in an effort to spare hospitals from being inundated from the highly-contagious virus. DeWine started to lift the orders in May, in staggered phases.”…
June 29, 2020, “3News Investigates: The numbers behind Ohio’s COVID-19 case surge,” wkyc news, Cleveland, Ohio, Polansky, Trexler
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In a nutshell: By March 13, 2020 Trump had already planned 18 months of “emergency” government via 18 months of intermittent “lockdowns” and “multiple waves of illness:”
Added: On March 13, 2020, US released an 18 month Covid plan following findings of Imperial College London:
March 18, 2020, “U.S. Coronavirus Plan [published March 13] Warns Pandemic ‘Will Last 18 Months or Longer’,“ NY Mag., Matt Stieb
“On Friday [March 13]…the Department of Health and Human Services warned lawmakers that the pandemic “will last 18 months or longer” and that it could include “multiple waves of illness.” A copy of the unclassified 100-page report obtained by the New York Times also stated that “critical infrastructure and communications channels” between state and local governments “will be stressed and potentially less reliable.”…
The Trump administration’s solemn 18-month estimate is consistent with the recent findings of epidemiologists at Imperial College London, who determined that social distancing practices would need to be in effect “until a vaccine becomes available (potentially 18 months or more),” so that hospitals would not be inundated with cases in the interim.”
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Added: From US 18 month plan:
“PanCap Adapted US Government Covid-19 Response Plan,” HHS
page 4, subhead, “Assumptions” [with lockdown], “slow the spread”
“2 . A pandemic will last 18 months or longer and could include multiple waves of illness.” [What is definition of “illness?” As everyone knows, if you for example “test positive” you may never experience “illness” or symptoms. This is especially so with a PCR test.]
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Added: More from US 18 month plan: “Telecommuting and remote-meeting options in workplaces; mass gathering modifications, postponements, or cancellations:”
page 97 (page 100 pdf), subhead, “Definitions,” Mitigation”
“Mitigation – The Mitigation Phase, often referred to in CDC doctrine as community mitigation, leverages individual and community nonpharmaceutical interventions ( ) to help slow the spread of respiratory virus infections. Early, targeted, and layered use of multiple NPIs should be initiated early in a pandemic before local epidemics grow exponentially, be targeted toward those at the nexus of transmission (in affected areas where the novel virus circulates), and be layered together to reduce community transmission as much as possible. These include actions an individual or family can take, actions our healthcare system can take , and actions our community (schools , faith -based organizations, businesses ) can take. Examples of NPIs include voluntary home isolation of ill persons (staying home when ill); respiratory etiquette and hand hygiene; self-monitoring for illness and understanding homecare and knowing when to seek care; taking infection control measures when caring for patients who may be ill; telecommuting and remote-meeting options in workplaces; mass gathering modifications , postponements , or cancellations; and routine cleaning of frequently touched surfaces and objects in homes , child care facilities , schools, and workplaces.”
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Comment: Trump destroying the US economy based on nothing but an unverified UK computer model was an act of war:
“Taking action to destroy a nation’s economy is an act of war just as much as is staging attacks using bombs carried by spies or using missiles fired from planes.” Philip Giraldi
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