The central, befuddling economic reality of the United States at the close of 2020 is that everything is terrible in the world, while everything is wonderful in the financial markets.
It’s a macabre spectacle. Asset prices keep reaching new, extraordinary highs, when around 3,000 people a day are dying of coronavirus and 800,000 people a week are filing new unemployment claims. Even an enthusiast of modern capitalism might wonder if something is deeply broken in how the economy works.
To better understand this strange mix of buoyant markets and economic despair, it’s worth turning to the data. As it happens, the numbers offer a coherent narrative about how the United States arrived at this point — one with lessons about how policy, markets and the economy intersect — and reveal the sharp disparity between the pandemic year’s haves and have-nots.
It starts, as so many epic tales do, with a table of data from the National Income and Product Accounts, namely “Personal Income and Its Disposition, Monthly.”
This report captures how Americans are earning and spending, two activities that coronavirus drastically altered this year. By combining the numbers from March through November (the latest available), and comparing them with the same period in 2019, we can see more clearly the pandemic’s whipsaw effects.
The first important observation: Salaries and wages fell less, in the aggregate, than even a careful observer of the economy might think. Total employee compensation was down only 0.5 percent for those nine months, more akin to a mild recession than an economic catastrophe.
That might seem impossible. Large swaths of the economy have been shut down; millions are out of work. The number of jobs employers reported having on their payrolls was down 6.1 percent in November compared with a year earlier, according to separate Labor Department data.
So how can the number of jobs be down 6 percent but employee compensation be down only 0.5 percent? It has to do with which jobs have been lost. The millions of people no longer working because of the pandemic were disproportionately in lower-paying service jobs. Higher-paying professional jobs were more likely to be unaffected, and a handful of other sectors have been booming, such as warehousing and grocery stores, leading to higher incomes for those workers.
The arithmetic is as simple as it is disorienting. If a corporate executive gets a $100,000 bonus for steering a company through a difficult year, while four $25,000-per-year restaurant workers lose their jobs entirely, the net effect on total compensation is zero — even though in human terms a great deal of pain has been incurred.
So wages, salaries and other forms of workers’ compensation dropped only a little — $43 billion over the nine months — despite mass unemployment. But there is more to the story.
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