President and CEO, U.S. Chamber of Commerce
September 03, 2020
Depending on where you sit in the COVID economy, business could be booming or on the brink of bankruptcy. The pandemic’s uneven economic impact on industries and workers has been stark. Enter the K-Shaped Recovery.
Long gone is the notion that we’ll have a V-Shaped Recovery—a deep economic decline followed quickly by sharp rebound. Instead, what we’re looking at is a recovery that will be vigorous for some sectors while others remain in freefall. That's what a "k-shaped recovery" means:
On the plus side, we’ll continue to see tech companies and some segments of the retail industry, for example, thrive as their products or services directly support work, education, health, or simply daily life in a pandemic. Their ability to operate, adapt, and expand in this environment has kept people healthy, connected, and productive. They are supporting remote work, learning, and telemedicine and ensuring food, supplies, and medicine continue to flow into our homes. Their success has also kept the stock market hovering around all-time highs and is expected to drive the strongest growth rate on record in the third quarter. That's the top arm of a K-shaped economic recovery.
Yet, the other side of the recovery is bleak. For countless companies in the travel, entertainment, leisure, hospitality, and food service industries, there is no end in sight to the economic malaise. As long as necessary social distancing and public health restrictions are in place, it will be difficult if not impossible to get back to strength. Though many are doggedly working, innovating, and adapting to stay open, there is only so long you can survive on razor thin margins with persistently diminished revenue. The uneven recovery is even cutting across some sectors, which explains why some retailers are setting records while others are facing liquidation. Small businesses across industries are facing similar challenges.
The K-shaped recovery is also evident in employment numbers. The financial services sector, for example, has already recovered 94% of its pre-pandemic employment. Leisure and entertainment, on the other hand, has only brought back 74% of the workforce. So, while many of us are lucky to mainly be Zoom-fatigued or otherwise harried by life in a pandemic, for millions of others, the economic impact of COVID is existential. The layoffs have come hardest and fastest for those least able to survive prolonged joblessness, creating a cascade of setbacks from which it will be very hard to recover.
As a business community and a nation, we cannot allow millions of workers and broad swaths of our economy to be left behind in the COVID recovery.
Our lawmakers deserve a lot of credit for working quickly and cooperatively, on a bipartisan basis, to provide federal relief to employers and workers in the early days of pandemic. Their historic efforts helped many businesses and families stay afloat and prevented the economic fallout from being even deeper.
Their work is not done. The Chamber has called on Congress to pass additional targeted and temporary measures to help those on the wrong side of the recovery.
The Costs of Inaction are Steep
The industries, businesses, and workers disparately harmed by the pandemic will need more support for a greater period of time than those that bounced back quickly. According to the National Restaurant Association, the restaurant industry will lose $240 billion by the end of 2020 if Congress doesn’t act. Without additional support, U.S. airlines may be forced to furlough 75,000 pilots, flight attendants, mechanics, and other workers.
It is estimated that four million small businesses—13% of America’s 31 million smallest employers—have now exhausted the Payroll Protection Program funds that allowed them to stay afloat. Without further assistance, many face imminent and permanent closure.
The states and municipalities that fund and operate our public schools will need more support if they are going to keep children learning this fall. The average school district will face $1.8 million, or $485 per student, in additional costs for disinfectants, personal protective equipment, and other preparations to bring students into classrooms this year.
The business owners who are following public guidelines and doing everything possible to keep employees and customers safe must have assurances that they won’t face litigation abuse stemming from the pandemic. COVID-19 is already generating lawsuits, and many more are on the way. Lawmakers should pass reasonable liability protections, as they have done in the aftermath of previous crises, like 9/11. Across the political spectrum, 82% of voters believe this is the right thing to do.
The Time to Act is Now
The fact that Congress has allowed politics to stand in the way of these priorities suggests a creeping sense of complacency. Perhaps some think we’ve moved past the economic emergency and ultimately skirted the crisis. They might see 20+ percentage points of growth in Q3 and think we’re out of the woods. They would be sorely mistaken.
For laid off workers and for businesses barely scraping by, the crisis is as acute today and it was in March, when both houses of Congress unanimously passed the CARES Act.
As Congress prepares to return for the fall after Labor Day, it is time for them to get back to work. They need to muster that same sense of urgency, purpose, and determination to support those still on the brink.