Nov 19, 2020 - Economy

Split speed of economic recovery

Reproduced from the Leuthold Group; Note: Subdivides the total U.S. unemployment rate between four sectors with the lowest average hourly earnings and the remaining nine sectors; Chart: Axios Visuals

Job recovery is arriving much faster for workers in America’s highest earning industries.

Why it matters: The bottom earning industries are nowhere near recovered — right as the economy faces another test from the pandemic.

  • Meanwhile, high earning industries have an unemployment rate that’s approaching normal.

Flashback: The unemployment rate in the highest and lowest earning industries was within a tight range, 3% and 3.5%, respectively, according to investment research firm the Leuthold Group. (Bottom earning sectors have historically seen slightly higher rates of unemployment.)

  • Then the gap exploded when COVID-19 forced the initial wave of widespread lockdowns in the spring.
  • High earning sectors’ unemployment rate rose to 12%. But it was nearly twice as bad for the lowest earning industries, with unemployment peaking at 23%.

Details: Industries like retail, leisure and hospitality, agriculture and nondurable goods are the bottom earning industries.

  • Top earning industries include finance, durable goods, and professional and business services.

Between the lines: The unemployment rate among the low earning sectors remains 6 percentage points above its pre-pandemic level.

  • Recovery is in reach for the high earning industries, with unemployment just 2.5 percentage points higher than pre-crisis levels.

Where it stands: More than half of currently unemployed Americans worked in the bottom earning industries, even though they represent only 24% of the workforce.

What they're saying: With soaring COVID-19 cases leading to restrictions across most of the country, analysts expect the lowest income industries to once again take a bigger hit to employment.

  • "Similar to the summer’s second wave, high-earner, mostly anti-social industries (three-quarters of employment and a higher proportion of total income and spending) will likely again prove largely impervious,” Jim Paulsen, chief investment strategist at the Leuthold Group, wrote in a research note on Wednesday.
  • This could explain why the U.S. might not see as big an economic drag as the coronavirus rages across the country.
  • Top earning workers “quickly and decisively entered a new [economic] expansion — even though 55% of the unemployed still struggle with extremely challenging conditions,” says Paulsen.
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