Low-income families start in a very different place than where they were in the last recovery. Indeed, American households have, on average, been in the best financial shape for decades. Debt levels, excluding mortgages, are lower than before the pandemic. Violations and standards are also down. And Americans are sitting together on a mountain of cash: $ 6 billion in savings from March, more than four times as much as before the pandemic.
Averages, of course, do not tell the full story. The rich and even the affluent did exceptionally well during the pandemic. They generally kept their jobs. They have seen the value of their equity portfolios rise. And they spent less on vacations, restaurant meals and other services. For those on the other end of the economic spectrum, the picture is quite different: many of them lost their jobs, had no investments to start with, and needed every penny of the help they received to cover basic living expenses. to cover, that help at all.
The divergent fortunes are what commentators call the ‘K-shaped recovery’ – quick gains for some, collapse for others. But that narrative is incomplete. Millions of people have been financially devastated, but many more. Most low-wage workers kept their jobs, or got them back relatively quickly. Many of them will emerge from the pandemic in better financial shape than they entered it, thanks in large part to the successive rounds of government assistance. Low- and middle-income families were guilt-ridden from the last recession and tried for years to climb out of the hole. That reality colored their financial decisions long after the recession was over: whether they should buy a house, whether they should go to university, or whether they should take a chance on that new job or that new career or that new city . This time, many people have the opportunity to free their choices from that burden.
The lesson of both the crisis and the last one is that policy matters. In the last recession, an initially fairly strong response came down too quickly, leading to a decade of stagnation. It did not happen this time, but it still can. Unless the number of jobs in April indicates a wider slowdown – something almost no forecaster thinks it is likely to be – overall economic statistics will start to look very strong in the coming months. “There’s a tendency to look at the numbers and say ‘Mission accomplished’ before it’s time,” says Nela Richardson, chief economist at ADP, a firm that processes payroll processing.
This is what happened a decade ago. But this time, many more people are paying attention. Within the White House, economists have lifted labor force participation among black women as an important measure of economic health. Powell, at the Fed, now speaks in virtually every public appearance about race and inequality – topics that previous Fed chairmen have usually tipped over or avoided altogether. Journalists who covered the aftermath of the last recession are likely to question the idea that the economy is good, simply because the unemployment rate is low.
Kristen Broady, a fellow member of the Brookings Institution’s Metropolitan Policy Program, says people are finally paying attention after years of preaching that public policy discussions should focus less on total statistics. Recently, journalists and policymakers discussed the topic with her, rather than the other way around. This, as much as anything, is cause for optimism.
“This is the first time I have hope,” she says. ‘