It’s Looking Like a K-Shaped Christmas in the U.S.




The K-shaped economic recovery has been with us for months, but the distance between haves and have-nots has never been more obvious than now, in the Christmas shopping season. I got an email Dec. 1 from Bloomberg Boston Bureau Chief Tom Moroney, who is managing editor for TV and radio in Boston: “Bloomberg has a story out today that says people will have 1.2 trillion extra to spend on the holiday and that will make it a record season. How does that square with these long food-bank lines and people screaming for another stimulus etc?”

Good question, Tom. The article he mentioned says, “This holiday shopping season still looks like it’ll be one for the record books.” It quotes President Craig Johnson of the consulting firm Customer Growth Partners saying, “There’s an extra $1.2 trillion in people’s pockets versus a year ago. It’s like dry powder to spend for Christmas.” Upper-income households have also benefited from record stock prices. So far this year through Dec. 1, despite the pandemic, the Standard & Poor’s 500 index is up about 13% and the Nasdaq Composite Index is up an incredible 38%.

At the same time, there are long lines for emergency food pantries from Dallas to Miami. According to the Census Bureau’s Household Pulse Survey, there were 5.7 million people in households that often didn’t have enough to eat as of late October and early November. The unemployment rate for all Americans remains elevated, at 6.9% in October. It was worse for Black Americans at 10.8% and Hispanic Americans at 8.8%.

Christmas is a hard time to be stressed out by money problems, not that any other time of year is easy. The relentless emphasis on good cheer and gift-giving can be difficult to take if you’re tapped out and frazzled. An October report by the Department of Health and Human Services [PDF] predicted the U.S. poverty rate would be 13.6% in the last five months of this year, up from 10.5% last year. In human terms, that’s almost 10 million more people in poverty.

Economists have several explanations for why some Americans are spending at a rapid clip while others simply can’t. For those who can work from home and have had steady incomes, 2020 has been—financially at least—quite tolerable. People cooped up most of the year by Covid-19 haven’t been spending on travel, restaurants, and entertainment, so they have lots of cash available for goods that can be enjoyed at home, everything from jewelry to yoga pants.

Life is more precarious on the lower leg of the K. People with lower incomes were more likely to be laid off in the spring and many still haven’t been hired back. Even households that are keeping their heads above water are bracing for the possible end-of-year expiration of pandemic unemployment assistance, eviction moratoriums, and forbearance by lenders on mortgage and student loan debt. For them, to quote Dolly Parton, it’s going to be a hard candy Christmas.

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