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.)
Here’s one more letter to consider when thinking about the financial and economic impact of the coronavirus: K. The sudden stop in the economy impacted the entire country, as jobs vanished and the stock market crumbled. Fortunes soon diverged: white collar workers who could stay at home and continue to earn money were doing pretty well, as were their retirement accounts, after the stock market quickly bounced back and soared from the March lows; while tens of millions of non-essential service and gig workers were sidelined (more than 30 million Americans are currently receiving unemployment benefits, as of this writing.)
If the pandemic has acted as accelerant to business trends, like the growth of online shopping and the demise of the department store, it has also become an accelerant to income and wealth inequality. Last year, before the onset of the 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%. Meanwhile, four 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 in an economy that feels like quicksand. They are fearful of what happens when the government’s $600 weekly unemployment benefit expires at the end of the 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.