Tracking the Recovery
By Albert B. Kelly
If you should find yourself with time on your hands and want to do something that is informative, check out the website www.tracktherecovery.org. Created by Harvard-based “Opportunity Insights” led by a team of economists and scholars including Raj Chetty, John N. Friedman, Nathaniel Hendren, Michael Stepner, this website uses credit card and payroll data to track the economic impacts of COVID-19 on people, businesses, and communities across the United States in real time.
As you might expect, employment rates have come back somewhat to where they were before the pandemic for high-wage workers, but remain stubbornly low for those at the bottom end of the economic ladder. As for the numbers, for those earning more than $60k per year, employment rates were off a mere 0.5% as of the end of June. But for those earning $27k per year or less, those we now call “essential”, employment rates are down 16% from their pre-pandemic levels.
As for why, the researchers found that in the high income zip codes, spending by the wealthy was down significantly, especially those services that involved engaging with people in brick and mortar establishments. Businesses in the most affluent neighborhoods in the country lost more than 70% of their revenue. The result was that some 70% of low-wage workers working in the highest-rent ZIP codes lost their jobs compared with 30% in the lowest-rent ZIP codes.
Closer to home in New Jersey employment rates overall decreased by 8.3% compared to the beginning of the year pre-pandemic. Drilling down further, as of the end of June, the employment rate among those making less than $27k per year decreased 16.3%. When you consider that restaurant and hotel spending by all consumers decreased by 28.7% compared to the start of the year, it is no wonder that employment rates among lower wage earners who work in these establishments decreased as much as they have. In comparison, for workers earning between $27k and $60k a year, employment rates decreased 7.7% and for those earning $60k or above, employment rates decreased just 2.2%.
On the spending side, as of the end of July, total spending by all consumers in the state decreased 7.3% from where it was in January. However for those earning less than $27k, spending decreased a mere 0.5% from pre-pandemic levels. This makes sense to me. For those at the bottom, life is about surviving and that necessitates spending what you earn just to get by. In contrast, for earners in the middle ($27k to $60k), spending decreased 5.2% from January levels and for those on the higher end of the scale (above $60k), spending decreased 9.2%.
In terms industries, the category to take the biggest hit in New Jersey is transportation, which decreased some 50.5% since January. There’s nowhere to go and nothing to see and we know that because the next biggest decrease can be found in the entertainment and recreation category which is down 42.7% from January levels. The category of “general merchandise” was off a slight 0.6% from what it was in January and grocery buying decreased 11.3% over the first 6 months of the year.
After crunching the numbers, some of the key takeaways offered by researchers include the thought that stimulus payments to households and Paycheck Protection Program loans to small businesses have not led to type of rebound hoped for among the businesses that lost the most revenue. Because of that, these programs have had a limited impact on employment rates for the low-income workers who staff these businesses.
Conversely, extending targeted assistance to low-income
workers impacted by the economic mess we’re in through such measures as
unemployment benefits is a critical part of reducing hardship for many
households and a big part of mitigating the disparities made deeper during this
pandemic.
Not surprisingly, their biggest takeaway is that the only real way to get to recovery in this country is to invest in public health initiatives that will restore people’s confidence to the point where they are back to spending and consuming as they were before the pandemic hit.
While some claim that the increased unemployment benefits are nothing more than a disincentive to work, my own thought is that they kept the most vulnerable from utter ruin and desperation. Those talking about disincentives are the ones with options. The disparities we see were not caused by the pandemic, they were just made more obvious- something we ignore at our peril.