The economic recovery is benefitting the well-off more than those struggling to make ends meet.
In July, Americans put $3.2 trillion into savings accounts; also in July, almost 15 percent of American households with children reported they lacked adequate food. A quarter of U.S. households have reported being able to pay down debt faster than usual; an equal proportion reports lacking the money to pay rent, mortgage, or other monthly obligations.
Employment for high-wage workers is now only 1 percent below pre-pandemic levels; for low-wage workers, the gap is 15.4 percent.
It’s been called a K-shaped economic recovery, in which there’s a sharp drop followed by gains for some, while others slide further toward bankruptcy and homelessness.
Higher corporate profits and stagnating wage growth among people without technical expertise have combined to worsen income inequality, according to a new study by the U.S. Federal Reserve, which also found that “wealth inequality” has been worsened by capital gains: wealth among households earning in the top 5 percent increased 186 percent from 1983 through 2015.
The stock market is an example. It entered a bull market shortly after the crash. But 52 percent of U.S. stocks are owned by the wealthiest 1 percent and more than 87 percent by the top 10 percent, a number that has climbed to near-record level since February. In contrast, the bottom 50 percent of households own less than 1 percent; most households own no stocks at all.
Real estate makes up 12.8 percent of the net worth of the top 1 percent and 54.4 percent of the bottom half’s net worth, primarily in the form of home equity. The top 1 percent have 34 percent of their net worth in stocks; for the bottom 50 percent, it’s 2.2 percent.
The U.S.’s economic output will show robust gains in the next few quarters, business many economists predict, however, those gains will continue to be spread unevenly, which poses longer-term risks.
The work-at-home tech sector employed those who can telecommute and will not be hard hit from the lockdowns. However, the lower paid service sector employees who work in restaurants, hotels, tourism, salons, gyms, etc., will continue to lose wages and face unemployment.
TRENDPOST: As the facts prove, with big corporations getting bigger and Mom and Pop main street business – such as stationary, hardware, drug and clothing stores – going out of business, since the 1980s, the bifurcation of the economy has intensified income inequality.
Again, as the rich got richer, consumer spending slowed. In July, it rose 1.9 percent, a slower gain than in the previous two months and 4.6 percent below February’s pre-shutdown level.
Spending slowed as federal unemployment payments came to an end and people began to conserve cash against future uncertainty, analysts said.
Restaurant and travel reservations fell back in August, as did spending on groceries, a key indicator that households are expecting, or already feeling, a financial pinch.
July’s rate of personal savings was 17.8 percent; a year earlier, it was 7.6 percent.
TRENDPOST: The growing wealth gap and the Bigs getting Bigger was further evidenced as the giant private equity firms Blackstone Groetfsup and Global Infrastructure Partners partnered to buy Kansas City Southern (KCS), the fifth-largest freight railroad in the U.S.
The railroad rejected the partners’ previous offer, and the new bid has not been disclosed.
The rail carrier’s stock price rose more than 5 percent on 2 September after news of the bid became known.
KCS carries a significant amount of parts and finished products between the U.S. and Mexico.
The carrier, like most U.S. railroads, has embarked on a new business model calling for fewer, longer trains and tighter schedules.
