Making billions v making ends meet: how the pandemic has split the US economy in two

Making billions v making ends meet: how the pandemic has split the US economy in two
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It’s only a hundred miles from Manhattan to East Hampton but as the city swelters the Long Island town can seem a world away. Cool Atlantic breezes take the heat off long summer days spent on its miles of white, soft sand beaches. High-priced farm stands provide heirloom tomatoes, peaches and arugula to summer visitors and the mansions of the financial titans and the celebrities, including Beyoncé and Jay-Z, Julianne Moore and Robert Downey Jr, who summer there.

Nor does the coronavirus pandemic seem to have dampened the 1%’s enthusiasm for the Hamptons.

If anything, quite the opposite. House prices are soaring. High-priced rentals have all been snapped up. It took developer Joe Farrell just one day to rent Sandcastle, his 15-bedroom mansion with sunken tennis courts, for $2m for the summer to “a textile tycoon and his family who were stuck in Manhattan and wanted to leave the city on a day’s notice. This was a Covid situation – not a normal summer rental”, he told the New York Post.

The Hamptons really is a world away for Sara Fearrington. It may as well be another planet. The 43-year-old lost her job at Waffle House in Durham, North Carolina, when the pandemic struck. Now she, her husband and their six children are trying to make ends meet on $125 in unemployment benefits each week. Fearrington is one of the 2.6 million people to have lost her job in the food services and drinking industry since February.

The Fearringtons had been receiving an extra $600 a week in benefits thanks to an emergency lifeline set up by Congress in March. That expired at the end of July and Washington is deadlocked over a replacement. “Now we literally have to sit here and wait, your head on a chopping block,” she said.

Once again coronavirus has shown that it is far more deadly for those suffering from pre-existing conditions. For the US body politic that pre-existing condition is inequality.

Stock markets are setting new highs driven by soaring prices for the tech companies that enable those lucky enough to work from home. Apple is close to being valued at $2tn. The total wealth of US billionaires has soared $685bn since the middle of March to a combined $3.65tn. Rock-bottom interest rates have triggered a home sales boom for some as those with the money reconsider their priorities in the work-from-home era. With nowhere to go, those Americans who can are saving at record rates.

But only one in four Americans can work from home. Meanwhile roughly 30 million people are unemployed in the US, about 20% of the workforce. Almost 30 million Americans recently reported that they have not had enough to eat at some point in the previous seven days, according to the Census Bureau. The vast majority – about 26 million – had lower rates of educational attainment.

The recession has also further exposed the racial wealth gap. The job market ticked up again last month but 14.6% of black and 12.9% of Latinx adults were unemployed in July, versus 9.2% of white adults.

“It’s white-collar professionals who are able to work from home. In some ways, this is a sign that the economy is just officially split in two,” Glenn Kelman, chief executive of property company Redfin, told NPR last week.

“We are all in this together” may be the rallying cry for the pandemic but the truth is the poor, and particularly people of color, have been devastated by coronavirus and its attendant recession while the wealthy have weathered it and in some cases made huge gains. Research into previous recent pandemics from economists at the International Monetary Fund suggests it’s a trend that may continue even after the outbreak abates.

Economists often talk of V-shaped economic recoveries, a sharp drop and an equally sharp bounce back. Sometimes the economy drags along the bottom before bouncing back – a U-shaped recovery. Now there is talk of a “K-shaped” recovery. A fall followed by a split where the well off and well educated tick up while the poor and poorly educated fall further behind.

For people able to work from home, “life has returned largely to normal”, said Peter Atwater, adjunct lecturer in the economics department at William & Mary. “In fact, the wealthiest today are even richer than they were before the outbreak.”

For those people, on the arm of the K, Atwater said it’s “almost as if the outbreak never happened. That’s starkly different for people on the leg. If you are a small business person, work in the service industry, had to go back out into a manufacturing facility, a job in the ‘real world’, as it were, that has weighed heavily. Sadly it has weighed particularly heavily on minority communities at a time when they are the largest populations experiencing the outbreak. It’s a stacked inequity.”

Source: The Guardian

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