This divergence, described as a “K-shaped recession” by economists, means that the headline economic numbers in many ways underplay the financial stress and pain that families are feeling. And, as Trump’s tweet yesterday proved, it poses a potent political threat, dampening congressional interest in passing the trillions of dollars of emergency stimulus that the country desperately needs.
As a general point, recessions tend to hit small companies harder than big companies, and less educated and lower-income workers harder than more educated and higher-income workers. But this recession and recovery have proved particularly skewed: Normalcy for some, apocalypse for others.
For businesses, the pandemic-driven downturn has decimated some sectors while leaving others untouched, acting like a tornado rather than a hurricane. Restaurants, hotels, and airlines have seen their revenue collapse, with United Airlines down nearly 90 percent in the second quarter, for instance. The construction industry, among others, got hit hard in the spring but quickly rebounded. And some businesses—technology companies, grocery stores, the makers of home goods—have flourished. “Long gone is the notion that we’ll have a V-Shaped Recovery,” argues Suzanne Clark, the president of the U.S. Chamber of Commerce, the powerful business lobby. “What we’re looking at is a recovery that will be vigorous for some sectors while others remain in freefall.”
Businesses’ fortunes are also diverging based on their size. Extraordinary actions taken by the Federal Reserve have introduced trillions of dollars of liquidity into financial firms and large companies, helping buoy them through the crisis and pumping up the stock market. But Congress has not done nearly enough to aid small firms without access to the public markets or preexisting relationships with banks. Nearly all of the small companies that took Payroll Protection Program funds from the government have now exhausted the cash. Two percent of small businesses have already closed permanently.
Similar dynamics are playing out among households. For the wealthy, the pandemic has primarily changed where work is happening, not whether it is happening, given that workers with a college degree are six times as likely as workers without a high-school diploma to be able to work remotely. As a result, job losses have proved muted at the high end of the income scale, compared with the low end. For workers making more than $32 an hour, total employment is actually higher than it was when the pandemic hit.
For hourly workers, the losses have proved severe. The pandemic cut half of the jobs in the leisure and hospitality sector—at concert venues, museums, restaurants, hotels. Local reopenings after shelter-in-place orders have provided a bounce back, but only a partial one. Workers in those sectors have been much more likely to transition from temporary furloughs into permanent layoffs than in higher-wage sectors, and one in six low-wage jobs has disappeared since January.