Chart of the Month | Recession Impacts on Employment and Wages

November 3, 2020 |
1 minute read
|

It may come as a surprise to many that average disposable personal incomes have increased by 6.6 percent from February prior to the pandemic through August. This is down from a high of 9.8 percent in July as employment picks up and government unemployment assistance declines. As a result, U.S. consumers are in better shape than might be expected, as a 10 percent decline in spending has resulted in large increases in savings. Not all groups have been affected equally as seen by employment declines by wage level and ethnicity. Lower wage industries such as leisure and hospitality and retail experienced a 33 percent drop in employment in March and even after rebounding somewhat, are currently still 13.3 percent lower than before the pandemic. Conversely, higher paying industries such as information technology, financial services and utilities have reported just a 5.6 percent decline. From an ethnicity standpoint, unemployment among Blacks and Hispanics stands at 12.1 and 10.3 percent, respectively, versus only 7.0 percent for Caucasians. This bifurcation demonstrates that the pandemic and resulting recession have exacerbated the persistent income and inequality issues that the country faces. At the same time, the lower wage consumer has benefited from a large injection of government support programs, including increased unemployment benefits and stimulus checks. In April, the CARES Act provided $1,200 per adult or up to $3,400 for a family of four making less than $99,000 per year, increasing lower wage workers’ disposable incomes by more than 30 percent. The timing and shape of another potential wave of stimulus are impossible to predict at this point. As result, the investment community will be challenged in trying to estimate the long-run sustainable level of consumption for these cohorts and the overall consumer.

img-com-Recession-Impacts-Employment-Wages

 

Ivo C. Nenin

Author

Ivo C. Nenin

Stay connected with the Insights Blog

Popular Blog Posts


Market Commentary | Insights Blog

Chart of the Month | The Surprising Relationship Between Money Supply and Inflation

The potential for rising inflation is becoming a top concern for many investors and consumers. Many believe that inflation is already here as evidenced by price increases in commodities, homes,...
Perspectives | Insights Blog

The Case for Using the Higher Education Price Index® (HEPI) to Define Inflation for Colleges

When calculating return targets for an endowment portfolio, a conventional piece of the equation is often the Consumer Price Index (CPI). CPI plus 5% is the common short-hand formula for institutions...
Investment Strategy | Insights Blog

What is an OCIO?

Outsourced investment management, once primarily a solution for small institutions with limited resources, is now used by a broad range of long-term investors. When properly implemented, outsourcing...

Disclaimer

Certain information contained herein has been obtained from or is based on third-party sources and, although believed to be reliable, has not been independently verified. Such information is as of the date indicated, if indicated, may not be complete, is subject to change and has not necessarily been updated. No representation or warranty, express or implied, is or will be given by The Common Fund for Nonprofit Organizations, any of its affiliates or any of its or their affiliates, trustees, directors, officers, employees or advisers (collectively referred to herein as “Commonfund”) or any other person as to the accuracy or completeness of the information in any third-party materials. Accordingly, Commonfund shall not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement in, or omission from, such third-party materials, and any such liability is expressly disclaimed.

All rights to the trademarks, copyrights, logos and other intellectual property listed herein belong to their respective owners and the use of such logos hereof does not imply an affiliation with, or endorsement by, the owners of such trademarks, copyrights, logos and other intellectual property.

To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated herein. Forecasts of experts inevitably differ. Views attributed to third-parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Market and investment views of third-parties presented herein do not necessarily reflect the views of Commonfund, any manager retained by Commonfund to manage any investments for Commonfund (each, a “Manager”) or any fund managed by any Commonfund entity (each, a “Fund”). Accordingly, the views presented herein may not be relied upon as an indication of trading intent on behalf of Commonfund, any Manager or any Fund.

Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Fund. Such statements are also not intended as recommendations by any Commonfund entity or any Commonfund employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information or statements. Past performance is not indicative of future results. For more information please refer to Important Disclosures.