Our Unequal Recovery

There’s been much discussion about the shape of our economic recovery and the need for further stimulus efforts. There’s been less about the emergent fault lines likely to persist beyond the crisis period and how to address them.

Early on, there was hope for a V-shaped recovery, wherein our drastic and near-immediate plunge into recession last spring would be matched by an equally dramatic recovery. This hasn’t happened. While recent economic data shows significant progress, such as the unemployment rate dropping to 7.9 percent in September from 14.7 percent in April, the Congressional Budget Office projects that it will take until the middle of 2022 to return to pre-pandemic real GDP levels. The unemployment rate is expected to remain above pre-pandemic levels for the next decade or more. Yes, decade.

This makes a check-mark recovery more likely. Since the drop this spring, we’ve begun a slow and steady march upward and to the right, the recovery taking longer than the injury and slowed by rolling shutdowns, continued illness, and behavioral changes. Of course, there’s also the dreaded W-shape recovery, wherein a second or third pandemic wave is worse than feared and we plunge into recession yet again. But with better precautions and mask-wearing, better therapeutics, and a vaccine on the way, I believe—or at least hope—that we are riding the check mark upward, however slowly.

Yet a gradual recovery should not be confused with an equal one. There’s growing talk of a K-shaped recovery, wherein the rich and big companies improve, while small companies, middle- and lower-wage workers slide downward (or at least fail to climb as fast). This is already taking place to some degree. Job losses have been concentrated among low-skilled and low-wage workers, minorities, and women. Meanwhile, a roaring stock market has padded 401(k) accounts and the pockets of wealthier individuals heavily invested in the market, who have the added advantage of largely being able to work from home.