(Bloomberg) — The U.S. economic recovery is wildly uneven. More than 13 million Americans are unemployed. At the same time, many others have been able to work from home and some are actually richer — thanks to a surging stock market and housing boom.
This conflict has been dubbed the “K-shaped” recovery. And it’s exacerbating racial, wealth, social and gender disparities, according to Peter Atwater, an adjunct lecturer at William and Mary, a university in Virginia, who has popularized the term.
It’s also compounding the challenges policy makers face as they consider additional stimulus measures to bolster growth.
Here are a dozen charts that show the divergence — or what Atwater describes as “stacked inequity on one side and stacked privilege on the other.”
Top of K
High-paid workers have fared much better than their low-wage counterparts. At the height of job losses in April, employees in financial and information services — bankers, real estate agents, telecommunications professionals — saw some of the fewest job losses.
These industries have recovered faster and typically pay more, with information workers making $1559 per week on average before the pandemic compared to $981 for all private-sector workers.
Bottom of the K
The leisure and hospitality industry has borne the brunt of pandemic shutdowns, with half of jobs in the sector vanishing in April.
Since then, only half of those jobs have come back. The industry employs one in nine people in America and pays some of the lowest wages in the country.
The Consumer
Job losses often lead to a slowdown in consumer spending, which makes up 70% of the economy. But at the start of the pandemic consumption remained steady, bolstered by unemployment insurance payments that allowed those without a job to keep shopping.
Those extra funds have since dried up and Congress is at a standstill in their talks to provide additional aid. As wealthy Americans have become more confident about the economy, the country’s lowest earners have become less optimistic as their jobless benefits shrink.
Americans with the lowest wages are having trouble affording normal household expenses.
Housing Market
The real estate market is surging, especially for affluent buyers and sellers as urbanites relocate to more-spacious suburbs amid the pandemic. But this hasn’t helped the two-thirds of low-income Americans, who don’t own their home.
And for those homeowners who have lost a job or are struggling, they are defaulting on their mortgages at the fastest pace since the previous financial crisis. Foreclosures are also seeing a sharp rise, despite government efforts to keep people in their homes during the pandemic.
Although President Donald Trump imposed a ban on evictions through the end of the year, it’s really delaying a ticking time bomb. Rent payments will still be due at some point and may be untenable for people who are still unemployed.
Stocks Surge
Record stock gains and surging housing prices have come amid unprecedented stimulus from the Federal Reserve, whose near-zero interest rates and bond purchases have kept mortgage rates low and encouraged investors to buy equities.
The rise in stocks has been propelled by companies that are benefiting from the pandemic, like Amazon.com Inc., and hurting companies like Macy’s Inc., which rely on in-store shopping. It’s also disproportionately impacting women and business owners of color.
The surge in equities, also driven by tech companies like Apple Inc. and Tesla Inc., is mostly benefiting America’s wealthy and top-earners who have extra income to invest and retirement accounts through their employers.
America’s richest people have seen their fortunes balloon, with Tesla’s Elon Musk, for example, at one point last month tripling his wealth to more than $100 billion.
Race, Gender
The pandemic has widened inequalities between men and women, and among races. More women have lost their job than men and fewer of them are returning to work as schools and daycare centers remain closed.
A decade of progress in the labor market for Black Americans has been erased, and this group is also dying from Covid-19 at twice the rate of White Americans. Latino Americans are nearly three times as likely to contract the virus compared to White people, according to the Centers for Disease Control and Prevention.
Corporate ‘Monopsony’
Corporate America has more monopolies, which has amplified racial and wealth inequalities during the pandemic. As more businesses consolidate, profits have surged for corporations but those proceeds aren’t trickling down to workers.
The net worth of the top 5% of households almost tripled between 1983 and 2016. A term some economists use to describe these companies’ influence over workers and wages is monopsony.
Monopsony has caused problems in industries where one large company overwhelmingly dictates employee earnings. That’s resulted in stagnant wages, especially for the lowest-income workers. The federal minimum wage, at $7.25, hasn’t kept up with inflation let alone the pace of house prices.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
