The two Americas of the Covid economy

Do you read the following headline from CNN Business and get a little nervous? Housing market concerns begin to emerge

If the answer is yes, you’re probably among the group that includes homeowners and investors — and whose frustration with the pandemic has more to do with the way Covid is affecting the way you can live your life rather than with the way it has threatened your livelihood.

Don’t worry too much about your home value quite yet. The cause for concern in the story was actually about a troubling warning from Home Depot, rather than any significant drop in house prices. And your 401k? Senate Majority Leader Chuck Schumer’s prediction that Biden would be able to sign a Covid relief bill by March 14 sent stocks up again.

Related: Should you rent or buy? Ask yourself these 3 questions

This is the strange state of the US economy in the time of Covid, where the housing market is bubbling along and the stock market continues to grow. A year into the pandemic, people who have money are not feeling the pinch, but those who don’t are suffering greatly.

“America’s unemployment problem is much worse than it seems,” according to another CNN story Wednesday. This one compared the unemployment rates for White Americans to other groups and compared men to women.

Hurting workers of color: Although the national jobless rate dropped to 6.3% in January, unemployment is much lower for White workers — at 5.7% — than for other groups: The Black unemployment rate was 9.2% in January, and the Hispanic jobless rate was 8.6%, according to the Bureau of Labor Statistics.

Hurting women: The jobless rate for women over the age of 20 is the same as that for men: 6%. But this too doesn’t tell the whole story. The pandemic has forced some women to drop out of the workforce to take on family care responsibilities, and they aren’t counted in the unemployment rate.

Meanwhile, of the 140,000 jobs lost in the US in December, all were held by women.

Whose job is inequality?

How the Federal Reserve — which sets US monetary policy but is not elected by voters — should be approaching the issue of income inequality, and even whether it should be considering the issue of income inequality, was an issue when Chairman Jerome Powell testified on Capitol Hill Tuesday.

From CNN’s Anneken Tappe: Sen. Pat Toomey, the ranking member of the committee, said at the hearing’s start that he would prefer that the Fed did not stray from its core objectives of price stability and full employment to focus on racial inequality and climate change.

And while Powell acknowledged that fiscal policy, and not the blunt tools of monetary policy, are more appropriate to target issues of inequality, he continued to stress that added support for some groups is still necessary.

“The economic recovery remains uneven and far from complete, and the path ahead is highly uncertain,” Powell said in his prepared remarks to the committee.

What should be done about the unequal pandemic? The economists who worry about things are extremely worried about a lot of things. And realizing there are a number of different Americas feeling the pandemic in extremely different ways is key to understanding the need for that massive $1.9 trillion relief bill the Biden administration is pushing.

“We need to make sure that those most affected aren’t permanently scarred by this crisis,” Treasury Secretary Janet Yellen, herself a former Fed chair, told the New York Times Monday. She also acknowledged that $1,400 relief checks in the proposal are imperfect, but she’s pushing them anyway.

“Success to me would be if we could get back to pre-pandemic levels of unemployment,” Yellen said, although she also argued the Covid economy has also moved the goal posts on what that level might be.

Inflation or not? In economist circles, there’s also a debate over whether Biden and Yellen’s very large and expensive fix will have unintended consequences and overheat things.

Larry Summers, the longtime adviser to Democratic presidents who is not part of the Biden administration, has issued warning to that effect, arguing the huge stimulus could set off a generational inflation that makes it more expensive to live and do business.

Writing for CNN Opinion, the economist Joseph Stiglitz brushes those concerns aside. “Congress must pass this legislation or risk an anemic and devastatingly incomplete recovery,” he wrote, and argued that if the economy rebounds more suddenly than expected, Congress should use that opportunity to revisit tax cuts pushed through during the Trump years that helped the wealthy and corporations more than anyone else. (Good luck getting 60 votes for that!)

Taxes will ultimately need to go up. Stiglitz again: “The average tax rate is too low to sustain the investments in infrastructure, technology and education that a prosperous 21st century economy needs.”

150 corporate leaders endorse Biden plan. CNN’s Phil Mattingly got the first look at a letter from some big names in business who backed the $1.9 trillion stimulus proposal:

The group of executives includes the top executives representing some of the powerful business interests in the US, ranging from bank and investment firms like Goldman Sachs and Blackstone, to technology companies like Google, Intel and IBM, to hospitality companies like Loews Hotels & Co. and airlines including American and United Airlines. Top executives from real estate, insurance and utility firms also signed on to the letter.

Tale of two chains. Finally, here’s more evidence that the pandemic is permanently changing the way we do business (or hastening those changes). Fry’s, the beloved West Coast electronics chain (where this writer bought computers once upon a time) shut its doors overnight.

Fry’s is a weird example since it’s a private company and isn’t seeking to restructure. From CNN’s report:

“The company, which had 31 stores across nine US states, said in a statement on its website that it ‘made the difficult decision to shut down its operations and close its business permanently’ because of changing consumer shopping habits and the ongoing Covid-19 pandemic.”

Compare that to Kohl’s, the discount chain that is trying all sorts of things to bring in more shoppers, including allowing people to return Amazon purchases in certain Kohl’s locations. That hasn’t worked and activist investors want changes.

Strange unrelated Fed story. The computer system by which banks and the Fed send trillions of dollars each day was down. “Operational error” was blamed. Read more.