With more than 50% of the U.S. population having at least one Covid-19 vaccination, we are starting to see the outlines of a post-pandemic economy. For all of the virus’ deadly effects (including horrific death rates in India and elsewhere), we are seeing a stronger economic recovery, fueled in part by President Biden’s $1.9 trillion stimulus. But the President wants to go further and reportedly will use tonight’s address to a joint session of Congress to attack structural inequalities economic growth alone won’t solve.
In the President’s address tonight to a joint session of Congress, he reportedly will call for tackling structural problems in elder and child care, education, race and gender discrimination, and excessive employer power in the labor market. Without those changes, overall economic recovery from the pandemic could simply reinforce or even strengthen inequalities that preceded it.
A return to pre-pandemic levels of economic growth can undercut dramatic claims that the virus has forever transformed the economy, and show the power of increased government spending to fight a downturn. When the pandemic took hold in March 2020, the U.S. economy was in the longest expansion since World War II—128 months. Private sector jobs had risen for 113 months in a row, although at a slower rate than in previous recoveries. And the unemployment rate hit 3.5% in February 2020, a level not seen since 1969.
The pandemic recession was not like other recessions, where some sectors such as housing, manufacturing, or finance experience problems that then pull down overall growth and demand. With the pandemic, everything came to a dead stop. GDP fell for two straight quarters, including a 9.1% drop in the second quarter of 2020, which the Brookings Institution noted was by far “the steepest quarterly drop in economic output on record”; GDP had “never experienced a drop great than 3 percent…since record keeping began in 1947.”
The federal government responded with massive fiscal spending, along with increased and expanded unemployment insurance, including many workers who never had qualified previously. Billions were funneled to small businesses, and the Federal Reserve kept interest rates near zero. Economist Christina Romer has estimated the total federal fiscal response to Covid-19 at $5.2 trillion, “much larger as a share” of GDP “than in most other countries”—up to three times as much proportionately as France, Italy, or Spain.
Without that federal spending, the U.S. and world economy could have plunged into a deep hole with widespread misery and very little hope of recovery. But even then, analysts worried the virus had damaged the economy for years. On overall growth, we were told last year the U.S. economy “could take three years”for a full recovery.
But this year, both hiring and new job openings are moving upward, with job openings actually surpassing pre-pandemic recession levels. Forbes’ Sarah Hansen reported that Bank of America (BOA) predicts we will recover all lost jobs by the end of 2021. And Goldman Sachs anticipates the unemployment rate falling to 4.1% by year’s end, with the “possibility of a return to the pre-pandemic rate in the mid-3s this year.”
BOA and Goldman are among the most optimistic forecasts, but other macroeconomic predictions also are rising. In March, the Organization for Economic Cooperation and Development (OECD), doubled their growth forecast for U.S., to 6.5%. They expect substantial job gains in the second half of this year, driven by President Biden’s $1.9 trillion economic stimulus package and continuing public health progress against the virus.
But more rapid overall growth shouldn’t obscure the pandemic’s unequal impacts. As the economy began to recover last year, analysts described not a “V-shaped” (fast) or “U-shaped” (a slow upturn) rebound, but a “K-shaped” one, where upper income people recover while lower income ones stay down. Those upper income households also have much higher financial assets and homeownership, so big increases in the values of those two asset classes have further increased inequality.
This pattern is shown in job losses and recovery. The federal Bureau of Labor Statistics (BLS) notes that “more than twice as many jobs were lost between March and April 2020 as were lost during the entire 2007-09 period” of the Great Recession caused by the 2008 financial crisis.
Economists at Opportunity Insights estimate that by March of this year, high-wage workers—those earning over $60,000 annually—had recovered all the jobs lost in the pandemic crisis. But middle-wage workers were still 6.5% below pre-pandemic levels, and jobs for lower-wage workers—those earning less than $27,000 annually—remained 29.9% lower. That’s the K-shape—recovery for better-off workers and households, but continuing damage to lower-income ones.
And these impacts aren’t spread evenly across the population. In February Treasury Secretary Janet Yellinnoted that Black workers and business owners were “the first to lose” their small businesses and jobs” and data suggest “Black workers will be the last rehired when the economy opens up.” She pledged that the Biden administration was fighting not only to end the recession but “to make sure that this pandemic isn’t another generational setback for racial equality.”
Working women, especially those with children or elderly dependents, also have been hit disproportionately. When schools shut down due to the pandemic, it both disemployed many women who work in education, and forced others to choose between work and care obligations. Many women had to do the latter, resulting in three to four times as many of them dropping out of the workforce compared to men. And professional women working from home faced a diversion into a “mommy track” that harms their chances for advancement.
These trends—income inequality, disproportionately harm to minority workers, and pressure on working women stemming from our inadequate child and elder care systems—preceded the pandemic recession. President Biden is now advocating policies not only to restore overall economic growth, but to address these structural inequalities. If he doesn’t succeed, then the pandemic won’t have dramatically changed the economy, but simply accelerated already existing inequality.