You probably don’t need more evidence to ascertain what a crazy year we just lived through in 2020. However, in the category of you can’t make this stuff up, Department of Labor statistics show that BOTH the lowest and the highest unemployment rates the United States had in the last 50 years (since1970), occurred just two months apart last year.
This shows both the speed and the severity of the government imposed economic shutdowns. These were meant to slow the spread and bend the curve of the initial outbreak of the COVID-19 coronavirus. However, evidence shows that the impact of the job loss has been disproportionately born by those at the lower end of the income spectrum.
Why is this? This is the first time we have ever had a recession that has been led by the service side of the economy. Typically, as we go into a recession and people fear job loss, they cut back on building new homes, doing home-improvement projects and buying big ticket items such as cars, appliances and computers. This all leads to a slowdown in the construction and manufacturing side of the economy.
However, the COVID-19 shutdowns largely impacted restaurants, bars, gyms, hotels and salons. This has led to both initial and ongoing job loss in the service side of the economy. These jobs generally have lower wages than higher paid, white collar, professional jobs or skilled trade construction or manufacturing jobs.
This means that those at the lower end of the economy are most at risk. How bad has it been? The chart below, from the Washington Post, shows the impact of the last four recessions on the top 25% of wage earners, compared to the bottom 25% of wage earners. You can see that the bottom 25% fell somewhat behind in the 2001, dot.com/9-11 recession and 2008, Great Financial Crisis recession, in each case, they lost approximately 5% more jobs than top earners did. However, as we shut down the service sector of the economy to slow the spread, you can see that the bottom 25% of wage earners got clocked this time around.