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- The US economy seems to be in a “K-shaped” recovery, where recovery is unequal among earners and job sectors.
- For instance, US Chamber of Commerce President Suzanne Clark, wrote in a post that financial services has mainly recovered, while the leisure industry has only brought back about 74% of its employees.
- Business Insider decided to look at job losses, or gains, from February to August among different sectors.
- The following chart shows that the industries with the biggest drops in employment from February to August tended to pay lower wages, while high-wage workers typically saw little change.
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The recovery in the US economy after the initial shock from the coronavirus pandemic is taking on a very troubling “K” shape: Some parts of the economy quickly rebound while others stagnate, like the diverging lines on the right side of the letter.
Americans in some low-wage industries are being hit especially hard.
The latest employment data from the Bureau of Labor Statistics shows this kind of split-in-two economy. Many of the highest-paying jobs and industries have seen a decent clip of recovery since this spring, while many low-wage jobs are still far below their levels of employment before the pandemic.
The “K shape” name is a play on two other letter-based descriptions of what can happen after a major economic shock. A “V-shaped recovery” is when the economy quickly bounces back after sharply declining, meaning charts of economic activity will look like a “V.” Meanwhile, an “L-shaped recovery” would mean the economy doesn’t rebound after a sharp drop, so charts will show the quick drop and then a long period of stagnation.
But the K seems to be where we’re at.
Many low-wage industries haven't recovered
One way to look at this unequal recovery is to consider how employment in different industries has changed since the start of the pandemic and how that interacts with typical wages in those industries. Business Insider looked at the percent change in employment in different industries from February 2020 to August 2020, along with pre-pandemic wages from the Bureau of Labor Statistics' May 2019 estimates.
Although the chart hasn't changed that much from previously reporting on job losses by industry using July figures, it still shows that some industries are seeing a slower recovery than others.
The following chart highlights the differences in job losses among sectors. The jobs with the worst declines in employment tended to have low median hourly wages, while high-wage jobs have generally seen fewer job losses to those that typical have high median hourly wages.
That is: Highly-paid professionals have seen much less of an employment hit from the pandemic than workers in several low-wage industries.
To zoom in, clothing stores employees made $12.17 per hour, one of the lower wages among industries. This sector also saw one of the biggest drops in employment from 1,289,100 in February to 916,900 in August, or a percentage decrease of 28.9%. On the other hand, jobs in monetary authorities-central banks had the highest hourly median wage among the sectors in the chart at $44.69 per hour. This job sector actually saw a net job gain of 19,300 in February to 19,800 in August or a percentage increase of 2.6%.
John Friedman, an economics professor at Brown University and co-director of Opportunity Insights, told Yahoo Finance in August that higher-paid workers were not as affected by the early effects of the pandemic and have already started to recover.
"What's worrying is that the speed of the recovery for those low-income workers seems to really be slowing," he added.
The K-shaped recovery could make inequality worse
This "K-shaped recovery" can exacerbate long-running issues of inequality in the US, as more affluent Americans and asset-owners are seeing a faster recovery than low-income workers. Dion Rabouin of Axios recently wrote "wealthy and middle-class asset holders have retained or resumed their jobs. And the value of their assets, like stock portfolios and homes, has risen to all-time highs."
The financial services sector overall has recovered 94% of its pre-pandemic employment, per reporting from Business Insider's Allana Akhtar, while leisure and entertainment has brought back just 74% of workers.