There's much talk these days about a K-shaped recovery. This is a recovery where professionals and those with higher wealth and income are hurt less by the recession and recover more quickly than moderate and low-income Americans.
The K-shape is driven, in part, because industries that employ high percentages of low and moderate wage jobs are not recovering as quickly as other industries.
The chart below is from the U.S. Chamber of Commerce article The K-Shaped Recovery and the Cost of Inaction. Key quote:
"Long gone is the notion that we’ll have a V-Shaped Recovery—a deep economic decline followed quickly by a sharp rebound. Instead, what we’re looking at is a recovery that will be vigorous for some sectors while others remain in freefall."
The Chamber article illustrates this by pointing out that "the financial services sector, for example, has already recovered 94% of its pre-pandemic employment. Leisure and entertainment, on the other hand, has only brought back 74% of the workforce."
Another factor is remote work. A much higher share of high wage jobs can be done remotely than low wage jobs. This has resulted in much higher levels of unemployment among low wage workers.
Cutting the data by income reinforces the idea of a K-shaped recession.
According to an NPR survey and covered in their article Nearly Half Of U.S. Households Face A Financial Crisis 54% of those with household incomes below $100,000 reported serious financial problems due to the pandemic, compared with only 20% of those with incomes above that threshold.
And, of course, the stock market's recovery heavily favors the wealthier. The top 1% of Americans in terms of wealth own over half of all stocks and mutual funds and the top 10% own about 87%.
That doesn't leave a lot for the other 90%.
Recessions have always increased economic inequality and hurt the wealthy less than those with low and moderate-incomes.
But this one seems particularly hard on the low to moderate-income group.
In terms of the recovery's shape, we think it will be both a swoosh and K-shaped. One reason it will be both is the k-shaped jobs and industry recovery will keep the overall economy from fully recovering quickly.
We think the economy will get to 90%-95% of pre-pandemic levels by the end of the year, but the last %%-10% - which are big percentages in terms of the economy - will take much longer.
Unfortunately for the small business sector, it over indexes in industries that are not recovering quickly. This is one reason we continue to forecast that a large number of small businesses will close this year.