In the K-shaped economy, it's not only good to be a professional desk jockey, but also an owner of financial and tangible assets. In large metro areas, prices rose about 9%. Low rates – which make mortgages more affordable and allow people to pay more for a house – in conjunction with a tight inventory stemming from new builds being interrupted last spring and people delaying moves until after the pandemic) led to listing prices rising over 10% year over year as of August, according to. Low interest rates have also shored up residential real estate values, offsetting the pressure of higher unemployment levels.
The market's rise is itself another piece of the "K." With interest rates so low, investors had no choice but to put their money into stocks, and low rates were themselves used as a justification for higher and higher valuations. Between the unprecedented – and mind-blowingly massive – amount of monetary stimulus as well as the fiscal stimulus (enhanced unemployment benefits, stimulus checks, etc.), the market completely soared. I was 100% right about these low-level jobs but 100% wrong about the effect this would have on the market's direction. The bulls think the economy will reopen, that we'll slowly get back to normal, and that all the jobs will come back.
Many small business owners are worried they will lose everything. Many employees are furloughed or laid off. But when I talk to my friends and professional contacts who work in brick-and-mortar businesses outside of finance and technology, their outlook is much more dour. So many people I know are super-bullish, citing the unprecedented amount of monetary stimulus and the economy's imminent reopening. In the May 8 Empire Financial Daily, I made the case that employment wouldn't bounce back to pre-COVID-19 levels for a long time because of the slow recovery of hourly jobs tied to the restaurant industry and other hourly employee-heavy sectors (in which I believed the recovery would be more "U" than "V"). I saw the bottom half of the 'K' coming back in the spring. A quick look at the survey shows that certain demographics, including low-income workers, are indeed having a much tougher time than others. Given these trends, it's no surprise that about 25% of respondents are having trouble paying their bills. In fact, according to a Pew Research survey that came out late last week, only half of workers who got laid off during the pandemic are back at work. Chamber of Commerce President Suzanne Clark explained that 94% of jobs lost in the financial-services sector have already been recovered, whereas leisure and entertainment industries have only hired back 74% of those laid off in the spring. In a recent blog post about the K-shaped economy, U.S. You see layoffs looming at some big companies like airlines and an outright depression for many small businesses. Many restaurant workers, airline employees, hospitality industry shift workers, and other lower-paid hourly laborers live at the bottom half of the 'K'.Įven though they've reopened, restaurants, airlines, theme parks, and hotels aren't getting the volume of business they need to support their cost structures. Some people on the top half of the "K" are even left financially better off because of the crisis, as is the case for many workers possessing expertise in e-commerce, supply chains, and cloud software.Įmployees at tech and e-commerce companies like Amazon (AMZN), Facebook (FB), Zoom Video Communications (ZM), Microsoft (MSFT), Walmart (WMT), Target (TGT), and Wayfair (W) live at the top half of the "K." While the economic crisis may not financially affect these knowledge workers, low-wage, hourly employees experience something more "U shaped" (slow recovery) or even "L shaped" (no recovery). Businesses that largely involve sitting in front of a computer or negotiating with other people on the phone or in person come back fast, albeit a little altered – sales meetings and business lunches go digital. Furloughed employees in industries like technology and financial services are called back, or are able to find new jobs to replace the ones they lost. This is when professional workers in select industries bounce back quickly and experience the equivalent of the coveted, rapid "V shaped" recovery.
But this fall, a new letter rose to prominence. I knew the characteristics that would designate an economic recovery a "V," "U," "W," and even an "L". ► I'm familiar with the concept of economic recoveries that are shaped like letters.
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