Economic victory of the Covid crash? It’s too early to declare
This nightmare scenario was averted, in large part thanks to an unprecedented federal response that included stimulus checks, small business loans and emergency credit programs. Later, the historically rapid deployment of safe and effective vaccines paved the way for a rapid recovery.
Yet, by many measures, Covid‘s recovery is incomplete – especially for Main Street.
- The US economy remains at 5.3 million fewer jobs than in February 2020. Mark Zandi of Moody’s Analytics does not expect a full employment recovery until early 2023.
- The unemployment rate fell from almost 15% in April 2020 to just 5.2% last month. This compares to the rate of 3.5% in February 2020.
- The number of Americans living in poverty increased by 3.3 million in 2020, according to the Census Bureau’s official poverty measure. However, the stimulus payments dampened the damage, keeping an estimated 11.7 million Americans out of poverty.
- The official poverty rate hit historic lows at 11.4% in 2020. An alternative measure of poverty fell in 2020 to 9.1%.
- Median household income fell 2.9% in 2020 to $ 67,521, the first statistically significant drop since 2011.
- Consumer confidence stood at 71 in early September, according to the University of Michigan. It is well below the pre-Covid level about 100.
In some ways, this is a confusing time to understand precisely what is going on in the economy. There are so many moving parts that blur the view of the recovery.
For example, the impact on the labor market of the reopening of schools and daycares and the expiration of improved unemployment benefits is only beginning to be felt.
The Delta variant has slowed growth in high-contact industries as it spreads to various regions and then recedes.
The good news is that workers are making more money. But they are also facing an increase in the cost of living.
- Average hourly wage reached $ 30.73 in August. This is 8% more than in February 2020.
- Consumer prices rose in June and July at the fastest 12-month rate since 2008 before cooling off somewhat in August.
- After adjusting for inflation, compensation is now lower than it was in December 2019, according to an analysis released in August by Jason Furman of Harvard University.
Although tech companies and other industries have boomed during the pandemic, parts of the economy remain hampered.
- According to the National Restaurant Association, 90,000 restaurants are closed permanently or long-term and the industry has 1 million jobs below what it should be before the pandemic.
- Despite regular hires this year by airlines, the total wage bill in the air transport sector is 70,500 lower than in March 2020, according to BLS.
- The Delta variant blocked hiring in the leisure and hospitality industry in August. Restaurants and bars lost 42,000 jobs last month.
The recovery was most evident on Wall Street, where stocks quickly recovered from the bear market – and continued to explode.
- The S&P 500 nearly doubled (up 99%) its March 23, 2020 low and sits at all-time highs. The index did not undergo a 10% correction throughout the recovery.
- The Nasdaq is even higher over this period, gaining 120% from Covid lows.
- The market value of the S&P 500 reached $ 40 trillion at the end of March, up $ 12 trillion from the pre-Covid peak of $ 28 trillion, according to the S&P Dow Jones indices.
Earnings per share of S&P 500 companies are well above pre-crisis levels.
- The total wealth of the richest 1% reached $ 41.5 trillion by the end of the first quarter. This is an increase of 33% compared to the end of 2019, according to the Fed.
- The wealth of the middle class grew 15% more modestly to $ 36.5 trillion. The poorest 50% saw their wealth increase by 23% to reach $ 2.6 trillion.