Sourced from Tyler Durden’s article on ZeroHedge, “Vast Stretches Of America Have Now Descended Into A State Of Deep Economic Hopelessness.”
After an initial decline in March 2020, the Stock market has returned to its full bloom, while the American economy struggles to break free from the shackles of the worst recession after the Great Depression of 2008.
What are the factors driving the stock market surge? Does it represent an accurate picture of the economy?
According to the U.S. Bureau of Labor Statistics, the unemployment rate reached an all-time high in April 2020 at 14.8%, which was 4.8% more than the financial crisis of 2007-09. The States observed some signs of improvement in the estimates of March 2021 at 6%. Hawaii and New York had the highest unemployment rate at 9% and 8.5%, respectively. S&P500 and other stock market indicators track publicly trading companies but a lot of Americans work for companies not listed in the public domain, and their spending on goods and services does not reflect in the stock market.
While the Federal government is presenting figures showing a decline in unemployment, many communities and small states struggle to make ends meet as residents of these states are either unemployed or working in low-paying jobs. Take for example, the small town of Ogdensburg, located on the banks of the majestic St. Lawrence River. With lockdowns imposed and the closing of borders, most of the warehouses and Canadian-owned businesses in the town were shut down. The grocery stores and the restaurants survived by laying off the majority of their workforce. According to a report by USA Today, the town of 10,000 people has a poverty rate of 75% higher than the rest of New York State. The government has gone nearly bankrupt. It would be difficult for such a town to imagine recovery. Situations are similar in towns like Selma, Douglas and Lamar.
The pandemic has disproportionately affected the poor. According to Pew Research Center, 56% of low-income workers who lost their jobs because of the pandemic remain unemployed compared to 46% of high-income adults.
Homeless Americans living in tents at a short distance from the Federal Reserve in Washington are evidence of the gruesome reminder of disproportionate economic recovery. The money usually goes from the Federal Reserve to Wall Street and the big banks. The poor do not get an opportunity to expand their credit for entrepreneurial efforts in the same way their wealthier counterparts do. Policy actions such as rate cuts, propping up the stock market, buying $3.3 trillion in Treasuries, and mortgage securities favor some over the others rob the poor of the opportunities to create wealth.
Jerome Powell, the current Chair of Federal Reserve, had to remark during a talk with the Economic Club of Washington, “They (homeless) need to be in the room with us as we make our decisions.”
The real estate market is booming while people are forced to live on the streets, and many others have to return back home to their parents. According to US Census Bureau, 33% of young adults have moved back with their parents, because of unemployment and student debts.
There is also an increase in crimes as a result of economic stress. The infamous ‘Knock out games’ (assaulting people without warning) are back, even in safe states such as New York. The New York Police Department reported 35 anti-Asian hate crime cases since January compared to 28 in all of 2020. Civil unrest continues to rage in many other major cities as well.
With the ongoing economic disruption and the pandemic on a rampage there seems to be little hope of the situation getting any better.