Our "K-Shaped," Uneven Economic Recovery
Confidence is key to the recovery, but the sentiment depends on consumers’ financial circumstances.
![Peter Atwater stands for a photographic portrait of himself](https://cdn.mos.cms.futurecdn.net/XwzSqfRfRnQFCQvwWYvJKF-415-80.jpg)
Peter Atwater is founder of Financial Insyghts, a research firm, and adjunct lecturer in economics for the College of William and Mary and the University of Delaware.
You have popularized the term “K-shaped recovery” to describe the impact of the pandemic on the U.S. economy. What is a K-shaped recovery? It’s the term I use to describe the clear economic divide that has been exacerbated by the pandemic. What I saw as early as the end of March last year was that for people who were able to pivot to working from home, their confidence immediately began to rebound. For everyone else, it was not getting better, and in many cases—particularly for those in the hospitality and travel industry—it was getting worse.
Confidence is critical because it drives consumer spending, which accounts for more than two-thirds of the economy. What has been striking is the degree we’ve seen a K-shaped recovery in just about everything, from the availability of credit—it was no problem for big corporations to refinance, while small businesses really struggled—to the workplace, where the bosses feel great and are thriving while those at the lower levels are really struggling.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Do you believe the Biden administration’s $1.9 trillion coronavirus relief package, which included $1,400 stimulus payments for most Americans, will address these inequities? For those at the bottom, it’s providing sustenance. But one of the things about so many of these fiscal stimulus programs is that they’re perceived to be temporary, so they have a minimal impact on confidence. You could see that last year, when certainty of support from the government would ebb and flow.
What are the issues that the stimulus package is failing to address? Clearly, employment plays a huge factor in generating confidence. In that regard, I think discussions about increasing the minimum wage are helpful. You could reduce the volume of the working poor, which is a phenomenon that is underappreciated today. I’m not suggesting that there be a single minimum wage for the U.S. because there are wage disparities from state to state, but I think we’ve been slow to act.
The stock market has performed well during most of the pandemic. What role does corporate America play in addressing these inequities? I think the goal of maximizing shareholder value has gone too far. When you look at the past decade, gains have been disproportionately delivered to shareholders, while employee wages have lagged and losses have been assigned to the public sector. There needs to be better balance. Corporations went into this pandemic ill-prepared for a downturn and were quick to look to the government for support. Big corporations should be capable of standing on their own two feet.
Vaccinations should help boost confidence, but how will we know for sure? I’m watching very closely to see whether we have a rebound in service, entertainment and travel—those industries that have high concentrations of low-wage workers. I look at a lot of Google trends data, and I’m looking for more searches for flights and cruises. One of the things about travel is that it requires planning, and planning is a high-confidence measure. A return to international travel, especially, would suggest a real rebound in confidence.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Another Analyst Moves to the Sidelines on Tesla Stock After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
Car Prices Are Finally Coming Down
The Kiplinger Letter For the first time in years, it may be possible to snag a good deal on a new car.
By David Payne Published
-
Rising Cyber Threat of AI: The Kiplinger Letter
The Kiplinger Letter Security experts warn that generative AI brings new risks with no clear defenses. With AI's rapid adoption, businesses are vulnerable.
By John Miley Published
-
Kiplinger Special: The Long-Term Future of the U.S. Economy
The Kiplinger Letter Kiplinger's report into what it will take the U.S. to maintain a healthy economic growth rate.
By David Payne Published
-
The Fight Against Cancer Enters a New Phase
The Kiplinger Letter Breakthrough treatments hold promise for patients and investors.
By Matthew Housiaux Published
-
After Decades of Promise, the Virtual Reality Era Has Finally Arrived
The Kiplinger Letter VR is a paradigm shift for consumer technology. The tech has a long road ahead, but amazing hardware already puts the huge potential on full display.
By John Miley Published
-
Fed Rate Cuts Still on Hold
The Kiplinger Letter With inflation stubbornly elevated, the Federal Reserve will keep interest rates high for now.
By David Payne Published
-
AI to Power the Next Generation of Robots
The Kiplinger Letter There's increasing buzz that the tech behind ChatGPT will make future industrial and humanoid robots far more capable.
By John Miley Published
-
A Spotlight on the Pacific States: The Kiplinger Letter
The Kiplinger Letter Most Pacific states are seeing good job growth in multiple sectors including tourism, hospitality, and construction.
By David Payne Published