A divided economy waits to heal


Even after Wednesday’s tragic Capitol Hill turmoil, there is rising hope, at least in some quarters, that the drama and uncertainty surrounding the 2020 presidential election will finally and fully come to an end soon. There is a dream that some of the raw edges of a divided electorate will begin to heal and that our attention can be more focused on increasing the delivery of coronavirus vaccines and improving opportunities to engage in trade and improve worker mobility. Let us hope that this dream comes to be.

The divisions that we see all around us go beyond politics. We have a divided, coronavirus-disrupted economy that could suit the opening lines Charles Dickens, whom I wrote about recently, immortalized in A Tale of Two Cities.

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.”

Across the nation, there are people who are experiencing some of the best of times and worst of times. Consider the wide-ranging November 2020 state unemployment rates. New Jersey stood at 10.2%. Nevada and Hawaii's rates were 10.1%. South Dakota’s rate was 3.5%, and South Carolina’s was 4.4%.

Or compare the 9% November unemployment rate for the more than 9 million workers who have less than a high school education with the 4.2% rate for the 59 million workers with a college degree. The difference is 4.8 percentage points.

Of course, differences in educational attainment are expected to map into unemployment rates in a modern economy, but the differences are increasing. In November 2019, the comparable rates stood at 5.3% and 2%, for a spread of 3.3 percentage points. Probing even deeper into November 2020 unemployment numbers, we find that the unemployment rate for leisure and hospitality workers stood at 15%. In 2019, the number was 4.9%. Yes, these are the worst of times for some people.

Another view of the divided economy is seen in the below chart, which shows year-over-year growth in retail sales, employment, industrial production, vehicle shipments, and housing starts. Driven largely by the relief checks sent by Congress and low interest rates, retail sales and housing starts are booming. They are enjoying the best of times. But employment growth, industrial production, and light-vehicle shipments, while improving, still show negative year-over-year numbers. These are not the best of times for them.

There isn’t much that Congress or any other austere body can do to reset the situation. Yes, the balm of cash sent to families or relief from losing a home or rental apartment can certainly bring temporary relief to those who need it, along with a small windfall to those who don’t. But it will take relief from the pandemic and a functioning economy that offers real employment opportunities for the unemployed to close the gap that separates the best of the economy from the rest.

All of this underlines the need for the Biden administration to make enhanced vaccine rollouts the top priority. Then, reduced uncertainty can come from a predictable government that embraces expanded trade and worker mobility opportunities.

In the meantime, when Congress steps forward to send more relief, wouldn’t it make sense for the relief to be targeted? We know which employment groups are suffering the most. And we know which regions are lagging.

Bruce Yandle is a contributor to the Washington Examiner's Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business & Behavioral Science. He developed the “Bootleggers and Baptists” political model.

View original Post


Please enter your comment!
Please enter your name here