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The sad, predictable limits of America’s “economic recovery”

Officially, the Covid-19 recession lasted just two months. So why are so many still suffering?

Emily Stewart covers business and economics for Vox and writes the newsletter The Big Squeeze, examining the ways ordinary people are being squeezed under capitalism. Before joining Vox, she worked for TheStreet.

Part of the Recovery Issue of The Highlight, our home for ambitious stories that explain our world.

Cassie Norris is stuck in what can feel like an inescapable poverty trap.

Her family hasn’t been able to afford child care, so she watches the kids — ages 1, 2, 5, and 9 — during the day while her husband goes to work for a little more than minimum wage as a small-engine salesman and technician at a local shop. She’s depressed and desperate to start working again, but it would cost hundreds of dollars to send their youngest children to day care while she looks for a job. Mississippi, where she lives, has child care assistance programs, but Norris says she would have to already be working to qualify. You can see the conundrum: Given their finances, she can’t buy herself that time.

“One week of child care would completely change our entire situation,” Norris says. The assertion might be overly optimistic, but then again, businesses say they are clamoring for workers right now, and job-wise, she isn’t picky. “I have no doubt that if I could get the kids in day care, I would be able to get a job within a couple of days, easily.”

Norris’s life hasn’t been much changed by the pandemic — the poverty she was living in before March 2020 pretty much matches the poverty she’s in now, save the stimulus money. She and her husband talked about trying to put the child tax credit toward day care, but that winds up going to other bills. Her family still relies on SNAP and Medicaid for basic needs.

On the work front, Norris, who is 26, has thought about trying to find something to do remotely, but there are complications. “Having a baby crying in the background isn’t super professional,” she says over the phone, talking over a baby crying in the background. She doesn’t have an internet connection at home, anyway.

By many of the usual benchmarks, the United States would appear to be in the midst of a relatively robust — albeit rocky — economic recovery. GDP has bounced back, unemployment is falling, and the stock market is booming. American households added a collective $13.5 trillion to their wealth in 2020. The economy hit its pandemic-induced low point in April 2020, according to those in charge of deciding these things, and has been improving ever since. Officially, the Covid-19 recession lasted just two months. Unofficially, to a lot of people, that designation is meaningless — or, at the very least, a little hard to swallow. The term “economic recovery” is a nebulous idea not based in their day-to-day realities.

“I have a general idea of what it means, but I don’t think to us, personally, it has an individual effect,” Norris says. “Covid didn’t make us poor; we already were poor.”

For Norris, economic recovery isn’t exactly the goal — her family needs much more. So do millions of families like hers. The country’s riches were already unevenly apportioned among the haves and have-nots before Covid-19 struck, and the pandemic exacerbated those circumstances. For many, support from the government has helped them tread water. But much of that support, such as expanded unemployment insurance, has dried up, and some people have struggled to access programs that are supposed to help them, like rental assistance. America risks widening the gaps even further.

“Technically, recovery is what occurs after the economy bottoms out and then is returning to its normal state,” says Karen Dynan, a Harvard economist who served as chief economist at the Treasury Department under the Obama administration. “But a lot of people find it odd to say the recession is over when the economy is still really weak.” Or, at least, weak for some people.

The pandemic economic downturn hasn’t been as severe as some economists and observers initially feared. The impact, however, has been incredibly uneven, as has the rebound from it. What’s happening in the economy depends on where you look and who you ask. In some ways, the economy has recovered relatively quickly. In others, it hasn’t recovered at all. And for some, the baseline wasn’t that good to begin with.

In a Pew Research survey released in September 2020, 46 percent of low-income respondents reported having trouble with bills since the pandemic started, compared to just 5 percent of upper-income respondents. Just 21 percent of upper-income people said they were able to save less due to the Covid-19 outbreak, compared to 51 percent of low-income people.

As the recovery goes on, Black and Hispanic workers still have higher rates of unemployment than white workers; the same goes for less educated workers compared with more highly educated workers. According to data from Opportunity Insights, a project at Harvard University, low-wage employment (defined as making less than $27,000 a year) is still around 20 percent below pre-pandemic levels. High-wage employment (defined at over $60,000 a year) is around 10 percent above pre-pandemic levels.

There’s been a constant push-and-pull between economic concerns and health concerns, with policymakers and businesses grappling over how much to curb economic activity in the name of protecting and saving lives. On that front, the country and the world have been stuck in a sort of perpetual purgatory, vacillating between priorities and half-measures in a way that leaves no one safe or satisfied.

Before the pandemic, the US had a stronger economy than it had seen in quite some time: The country’s unemployment rate was at its lowest level in decades, and people were feeling more confident about the economy than they had since before the Great Recession. But that doesn’t mean it was perfect by any means, Dynan says. “The growth in income inequality over the decades has been substantial, and it has been associated with a lot of hardship for many households,” she said. Some households were in much more precarious spots than others, which has shaped how they’ve absorbed the Covid shock.

During the pandemic, many middle- and high-income Americans have fared the same or are better off financially. They’ve been able to work from home and even saved money during lockdowns, having skipped vacation and dining out for months. For some, their wealth has even gone up, thanks to rising home values and a high-flying stock market.

Whitney Baker, a 52-year-old estate gardener from Kentucky, isn’t wealthy, but some of his clients are, and the pandemic leaving rich people bored at home and looking to improve their surroundings has boded well for him. After the initial shock, his life has gotten better — “only in the business sense, of course,” he clarifies. One of his main clients pulled back on landscaping plans when the stock market fell, but when it rebounded, he decided to forge ahead.

“In a matter of six to eight weeks, we were back to full swing,” he says. Baker isn’t much of a spender, and he’s been able to save more. He’s empathetic to people who are less fortunate than him, and he and his client donate food from the vegetable garden they’ve built out to a local pay-what-you-can restaurant.

They’re trying to help low-income people, many of whom have struggled more during the Covid-19 outbreak. When the pandemic hit, many people lost their jobs amid forced shutdowns, especially in hospitality and service jobs that typically weren’t well paid. Other low-wage workers who didn’t lose their jobs were declared “essential” and asked to keep going in, perhaps for an extra couple of dollars an hour in hazard pay that quietly faded after a few months.

When things are getting better faster for people at the upper end of the spectrum than they are for those at the lower end, economists generally refer to it as a “K-shaped recovery.” (Those two little diverging lines form the letter K.) The higher up the economic ladder you go, the fewer people you have, said Tim Liao, a sociologist at the University of Illinois Urbana-Champaign who has studied inequality in the pandemic. “If a lot of people are not feeling that we’re recovered, what does total recovery mean? That means much less.”

While it is true that the pandemic has been devastating for many Americans, it could have been much worse, were it not for pandemic-related support from the federal government. It has made a real, material difference in people’s lives. Measures such as the stimulus checks, unemployment insurance, the child tax credits, the eviction moratorium, and student loan pauses likely kept masses of households from careening toward catastrophe. Overall, many people have been able to save more, and poverty rates dropped.

“This has been a very strange recession, given that this is a recession where incomes actually went up,” said John Friedman, an economist at Brown University and founding co-director of Opportunity Insights. The caveat: That’s a statement about the average, and many of those income-boosting elements, such as unemployment benefits and stimulus checks, have wound down. The federal eviction moratorium has ended, and the enhanced child tax credit is set to expire in December.

At the end of January, the pause on student loans will wind down. Conditions could rapidly change and deteriorate. Not everyone who needs help has been able to get it, either. The federal rent relief program has been notoriously difficult to access. People experiencing unemployment have struggled to navigate the US’s convoluted, out-of-date benefits programs, and some people just fall through the gaps. Norris, a stay-at-home mom, for example, doesn’t qualify for unemployment insurance, and the US doesn’t have a job-seekers benefit for people on the hunt for work.

Moreover, just because a person isn’t careening toward catastrophe doesn’t mean their situation is particularly good or stable.

Jahson Lamothe, from Baltimore, was working inconsistent hours as a bank teller when the pandemic hit — sometimes part time, sometimes full time, depending on the week. He now has a new job as a service associate at a different bank, but the money isn’t great: He’s making $17 an hour trying to support himself, his partner, and their infant son. “I have a job that used to be a career for people,” he told me. “Now it’s barely enough to afford the median rent in the state that I live in, and to me, that is ridiculous.”

Lamothe says he feels somewhat fortunate in his situation. He can keep a roof over his head and the tow truck from coming for his car. He can pay for gas, too, though he notices that it’s pricey, as are a lot of things these days. “Everything costs more, but nobody’s getting paid more,” he says. “If it’s hard for me, I think about the people who make less than me or who are in worse positions than me. So I don’t know how ‘economic recovery’ can even be mentioned.”

Wages are going up, but so is inflation. People aren’t necessarily noticing the gains they’ve made, or they’re too behind for it to make an immediate difference.

Norris’s husband recently got a small raise at work, but it’s only by a couple of dollars an hour. She’s not entirely sure how — she thinks maybe his hours changed, or his tax rate was adjusted — but she says his take-home pay is now less. Their family contracted Covid-19 last year, and he’s had ongoing issues stemming from that. In July, he had to miss two weeks of work because of it. Norris has also had legal issues in the past — in 2019, she was arrested for passing a note at a bank demanding money before fleeing the scene. (She is awaiting trial.) The economic data says things are going better, but people like the Norrises aren’t necessarily feeling it. Income doesn’t measure hardship or health or stress.

Part of what’s been so jarring about the pandemic is how precarious a situation so many people were in to begin with, even if they didn’t realize it. What seemed like a relatively stable life — a decent job, a sustainable business — was easily tossed into chaos if you were unlucky enough to be in certain sectors.

Brandy Flores, a single mother from Texas, doesn’t describe her situation as a catastrophe, though she could. Instead, she tells me over and over again that it’s “horrible,” as she intermittently breaks into tears. “What I’ve been through I wouldn’t wish on my worst enemy. I don’t even know how else to say it,” she says.

Flores lost her home health business when the pandemic struck — patients, understandably, didn’t want her coming in and out and potentially exposing them to Covid. She was able to collect unemployment insurance through June, before Gov. Greg Abbott (R) ended expanded federal benefits early. She’s looking for a job now and has tried to get government loans to build back her business, but hasn’t had any luck on either front. Her savings are completely depleted; luckily, she’s been able to receive some public assistance, and her landlord is understanding.

The financial setbacks she’s endured pale in comparison to the personal tragedies she’s experienced: Both her mother and stepmother died suddenly during the pandemic, one of Covid-19. Both were 58. Flores has tried to find solace in that her mother had been an organ donor.

There’s plenty to say about how the pandemic has forever changed us, how there’s no going back to a new normal, how trends such as remote work and revised work-life balance priorities might stick. But it’s also important to notice how things have stayed the same, and that the old “normal” wasn’t necessarily good for everyone.

Trevon Logan, an Ohio State University economist and research associate at the National Bureau of Economic Research, pointed to the example of low-wage work. Many employers in service and hospitality have complained they can’t find workers — for myriad reasons, people aren’t eager to hop back into those poorly paying, front-line jobs. Employers “are familiar with a labor market that allows them to pay not even living wages and have people sign up for employment that way,” Logan said. “There are workers who were familiar with that system who are rejecting that.”

What’s not clear is how long that rejection will last, or how set this newfound sliver of increased worker power is. “I’m not sure how comforted we should be by this,” Dynan warned. “It’s fair to say right now that demand is booming for many people who haven’t done well so far in the pandemic, but I don’t know whether that demand is going to be enough to allow all of them to experience a full recovery.”

Indeed, part of the overall economy’s improvement hinges on the recovery of an exploitative system built on the backs of some people and not others. The typical capitalistic vision of growth (one that many progressives chafe at) has inequality baked in.

The reason many higher-income, and often white, people were able to stay at home and remain relatively safe, financially and physically, during the pandemic was because low-income essential workers, who were likelier to be people of color, kept the economy going. They delivered food and packages and worked at grocery stores and gas stations, putting themselves at risk for a supposed broader good, which often benefited people who had more advantages than them in the first place. Now, getting the economy going again, in part, depends on low-wage workers supporting supply chains and getting back into restaurants and bars to serve everyone else.

The growing inequality that predated and exacerbated the pandemic hasn’t gone away. The US economy isn’t recovering its way out of a deeply divided society. “When you think about it from the perspective of inequality, it doesn’t make sense anymore to ask if the economy overall has recovered. Rather, you have to think about how it’s playing out across distribution — who has recovered, who may actually be doing better than before, and who is still suffering,” said Friedman, the Brown economist.

Flores certainly hasn’t felt it. “I’ve not had an economic recovery,” she says. “How does it make sense that our economy is getting better when people are dying?”

Throughout the pandemic, there’s been a tension between how much to sacrifice the economy in the name of public health. But that debate misses the mark. There’s not a direct trade-off between health and the economy — the economy can’t get entirely back to normal when there’s a dangerous virus spreading. Ultimately, this all comes down to what’s happening to people. In August, the S&P 500 doubled from its pandemic low in March 2020. At least 4 million people have died of Covid-19 worldwide in that time. The S&P continues to hit record highs; people are still dying. There’s a recovery story to be told, but is it the right one?

I’ve spent much of the pandemic writing about what it means for the economy — the recession, recovery, and everything that’s happened in the middle. This is the basic story: The overall economy contracted sharply when Covid-19 hit, it’s gradually been improving, and some groups are doing much better than others. The stock market has been stellar; the landscape for Black workers, not so much. But the data can be messy, we’re in an unprecedented situation, and nobody is entirely sure what’s going on.

I’ve talked to a lot of economists, but I’ve also talked to a lot of regular people, and what they say and experience are often things that would never show up in the data. A Dollar Tree worker who was using a Kindle for a phone. An unemployed massage therapist who was showering less to save money. A Target associate who was dumbfounded that shoppers were suddenly desperate for yeast. Walgreens workers who laughed at the company’s mid-pandemic move to change the dress code, “Cuz who wants extra money over jeans days, right?” one joked on Reddit.

It’s good for everyone when the economy is good. After the Great Recession, a strong macroeconomy did start to help many people. “Looking at household finances, we finally saw some of the traditionally low-wealth groups start to build some wealth after some terrible years following the financial crisis,” Dynan said. This recovery also appears to be different from the one following that last recession, which was stubbornly slow. It could be more inclusive, depending on the policy choices ahead and how the pandemic and the response to it continue to play out. In many places, though, it will be all but invisible.

Norris and her husband are trying to figure out a way for her to go to work. She says she’ll take “whatever job can get me out of the house first,” though she is hoping that the job offers some help with child care. What she needs isn’t an economic recovery — she needs an economic future that is better.

Emily Stewart is a senior reporter for Vox covering the intersection of business, politics, and the economy.

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