Dec 15, 2020 - Economy

The inequality is getting harder to ignore

Illustration of a calculator with a flatlining EKG monitor

Illustration: Sarah Grillo/Axios

As the frenzy in IPOs and the overall stock market continues, data show overall consumer confidence is languishing and concern about income inequality is rising.

Driving the news: A new survey from research and data firm CivicScience provided exclusively to Axios shows 78% of Americans are at least somewhat concerned about the rising level of inequality in the U.S. and 48% are very concerned.

Why it matters: Economists and social scientists worry about income inequality because it tends to be followed by societal and geopolitical upheaval.

What we're hearing: "Typically rising markets are accompanied by societal trends that mirror rising confidence," Peter Atwater, an economics lecturer at William & Mary, tells me on Twitter.

  • "People should be more generous and peaceful. Unity and agreement should rise and politics should moderate and become more centrist."

That's not what's happening now. Public opinion in the U.S. is as divided as it's been in modern history and people are literally stabbing one another in the streets at political rallies.

The big picture: "People worry about the markets decoupling from the economy. Me, I am much more worried about how decoupled the markets have become from society," Atwater adds.

Watch this space: The Conference Board's latest surveys of CEOs' and consumers' confidence show a yawning divide.

  • CEOs in Q3 were the most confident they have been since early 2018, with confidence levels 48% higher than at the beginning of 2019.
  • Conversely, the Conference Board's commensurate readings on consumer confidence are near their lowest in four years and 16% lower than in January 2019.

Between the lines: Confidence within consumers is also telling the story of inequality. Data provider Morning Consult's daily consumer confidence index showed those earning more than $100,000 a year saw confidence levels increase last week to the highest in a month.

  • Those earning 50,000-$100,000 saw their confidence levels fall by nearly twice as much to the lowest in a month.

The bottom line: "The recent divergence across the income spectrum reflects drastically different realities," Morning Consult economist John Leer said in a release, "in terms of the personal financial conditions of these two groups heading into the winter months as the spread of the virus drives additional restrictions on economic activities."

Chart: Even big business CEOs are worried about inequality

Data: CivicScience; Chart: Axios Visuals
Data: CivicScience; Chart: Axios Visuals

While CEOs of large companies are doing well, they too are worried about rising inequality and the K-shaped recovery, U.S. Chamber of Commerce president Suzanne Clark says.

What we're hearing: "I’ve had a lot of CEOs tell me they’re actually worried about it because of the impact on the economy and the impact on their business," she tells Axios.

  • "They just talk about the economic ecosystem and that you can’t survive on the top of the K with the bottom of the K the way that it is. It’s not sustainable. They talk about it as a real business and economic issue."

By the numbers: The Chamber's latest survey of U.S. small businesses found that 62% fear the worst is still to come with COVID-19’s economic impact and 74% say they need further government assistance.

  • Half of small businesses surveyed say their operations can continue for a year or less in the current business climate before having to permanently close.

Where it stands: "Nearly 100,000 small businesses have already closed permanently due to COVID-19," the Business Roundtable said in a statement Monday night calling for Congress "to take urgent action to protect small businesses" with new spending.

  • "Those that remain, along with millions of families and individuals, are struggling to stay afloat."

The bottom line: "If you’re a big business and you need those customers or you need that supply chain you’re really worried about what’s happening to small business," Clark says.

  • "I’ve heard that a lot — from almost every industry. "
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