We’ve been through the crash, then the snap back and now comes the slog: America’s economy is gradually trying to regain its pre-pandemic strength, but it’s doing so at a wildly uneven rate across the country. We look at where the comeback is rolling along and where it is struggling, at the companies that are surprising pandemic winners and at whether a stimulus deal is coming. Read on for more about the winding road to recovery.
Charu Sudan Kasturi and Daniel Malloy, senior editors
recovery by region
1. Northeast Takes a Hit
Of the 10 states where the unemployment rate is still above 10 percent, five are in the Northeast region (New York, New Jersey, Pennsylvania, Rhode Island, Massachusetts). While they’ve had varying degrees of success against the virus — Rhode Island is actually a huge success story, while New York and New Jersey have been ravaged — what these areas have in common is an early and more strictly enforced lockdown, meaning they’ve sacrificed more economic activity to fight the virus.
2. Sun Belt Resilience
Across the Sun Belt — the region that runs from the Southeast to Arizona — governors and local officials were more resistant to lockdowns, and as a result these places saw less of a dip in economic activity. That economic resilience was challenged by a summer surge across these states, with the pandemic reaching crisis levels in Texas and Arizona. But as Bloomberg columnist Conor Sen points out, the Sun Belt has kept unemployment down because of its industry mix: It’s less reliant on in-person services and more on manufacturing and construction, which have stayed strong — particularly homebuilding in places like Arizona and Texas, thanks to the booming housing market.
3. California Nation
If it were its own country — and many residents would prefer it that way — California would carry the world’s fifth-highest GDP. But right now, this nation-size Pacific behemoth is struggling, and there’s no better symbol of the “K-shaped” recovery where the rich get richer and the poor get poorer. The state’s Silicon Valley titans like Facebook and Google, not to mention the ascendant Zoom, continue to soar in value and influence, as industries with lots of lower-wage workers like tourism were hammered. As a result, unemployment remains at 11.4 percent (the national average is now 7.9) and food insecurity doubled for Californians, as economists say the state’s recovery will take at least two years.
4. Midwest Resilience
A trip through the Moody’s Analytics and CNN Business “Back-to-Normal Index,” which crunches dozens of indicators of economic activity, finds that the Midwest and Plains states are better than average in getting back to the pre-COVID-19 economy — with South Dakota pacing the nation at 90 percent. This comes as manufacturing jobs are creeping back up, with the strongest push coming in the Midwest. But with worrisome virus spikes in states like Wisconsin as the cold weather arrives, and Midwestern politicians continuing to relax restrictions, the consequences could be severe.
5. Political Ramifications
So what does this uneven recovery mean for Donald Trump’s reelection? Of the six battleground states that are expected to decide the outcome (Pennsylvania, Michigan, Wisconsin, North Carolina, Florida and Arizona), only Pennsylvania and Michigan have unemployment rates higher than the 7.9 percent national average, and only Arizona is below the “Back-to-Normal” economic index national average of 81 percent. Our exclusive election prediction model gives Trump just a 15 percent chance of victory — slightly more bullish than other major forecasters thanks to the improving economy. The economic picture is not what it was in February, but there are bright spots.
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The last recession gave birth to companies like Uber and Lyft. Now amid 2020’s unemployment crisis, platforms that enable self-employed workers to charge subscriptions for their content are emerging as the new beacons of hope. In just the first three weeks of the pandemic, Patreon, a subscription-based platform popular among musicians, artists and other creatives, added 30,000 new users. As newsrooms laid off journalists, Substack — which lets writers build and distribute customized subscription-based newsletters — saw a 49 percent rise in sign-ups in March. For singers and journalists, bookkeepers and designers, IT engineers and porn actors, these platforms could be the future of the gig economy.
The recreational vehicle industry is seeing a spike in demand as people travel again — but steer clear of hotels and motels for fear of catching the virus. Marathon Coach expects sales to be up 30 percent this year, while Airstream's sales rose 11 percent year-over-year in May. Call volume has tripled at Cruise America, the country’s largest RV rental firm, and reservations have grown even faster. You can get as fancy as you like. Resorts catering to luxury RV travelers are sprouting across America, and some only allow entry to the costliest vans — which can carry a price tag of $3 million. But if you’re in that elite club, you can park your vehicle and enjoy infinity pools, tennis courts and spas at these pandemic getaways.
3. No Pet Peeve
Americans have been adopting dogs and cats in record numbers to make lockdown and long hours of remote working more bearable. And more pets mean more demand for pet food. From General Mills to Nestlé to online pet food retailer Chewy, companies in the business of producing tasty treats for our four-legged companions are profiting from the pandemic. And if you’re wondering why people would spend so much on pets when they’re struggling to make ends meet, read this OZY feature on how American dog owners shell out more for their pets’ oral care than for their own.
The cybersecurity firm drew global attention by uncovering the Russian hackers who stole emails and data from Democratic National Convention servers in 2016. With the world’s economy shifting almost entirely online in 2020, digital security has never been more in demand. Which is why the Sunnyvale, California, firm has seen its share value skyrocket by nearly 150 percent since April, lifting its market cap past $33 billion. In September, it announced plans to buy Preempt Security, another cybersecurity firm, for $96 million.
The pandemic has given new life to this old money-transfer firm. PayPal expects to add 70 million new users thanks to the coronavirus, as more and more people opt for contactless payments and financial transfers. Its net income grew by 86 percent in the second quarter of the year, when the impact of lockdowns on the economy was most severe.
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If you’ve never heard of this Indian company, don’t worry. Most Indians haven’t either. Yet it's the turnaround story of 2020. Earlier this year, the little-known textile manufacturer was bankrupt, staring at what seemed like near-certain death. Then it was bought by Reliance Industries, owned by Mukesh Ambani. Asia’s richest man, Ambani in July passed Warren Buffett on the list of the world’s wealthiest as his telecom venture, Jio, drew $20 billion from global investors including Google and Facebook in just three months. With the pandemic driving down the economy, Ambani got Alok Industries to manufacture affordable PPE kits — a lucrative business that has since pushed the previously struggling company’s shares up by 822 percent.
3. Investing in Africa’s Health
Global investors and organizations are pumping unprecedented amounts into African health care startups. In May, Nigeria-based health tech firm Helium Health raised $10 million, while Ghana’s mPharma — which focuses on manufacturing and delivering medicines at lower costs — attracted $17 million. Nigeria’s 54gene, a pioneering startup building a database of African genes — the 54 is a reference to the number of countries on the continent — has drawn $15 million. Meanwhile, the World Bank’s investment arm has put $7.5 million into two Ghanaian firms. Will this prepare Africa to tackle future public health crises better, while also driving innovations that benefit the rest of the world?
4. Kweichow Moutai
For decades, China’s premier luxury liquor brand has been a staple at state banquets and corporate deal-signing ceremonies. Henry Kissinger once told Chinese leader Deng Xiaoping that “if we drink enough Moutai we can solve anything.” It appears Kissinger was right. Even the recession can’t stand in its way. Amid the pandemic, its share prices have surged, making it the most valuable company listed in China. As the Chinese say after downing each shot of Moutai: “Ganbei!”
5. Diamonds Aren’t Forever
Well, they are, just not on the same finger. The forced proximity of lockdowns has made many married couples rethink their relationship, while others are turning their arrangement into a committed partnership. Add the economic pressures of the times to the mix, and you have an unlikely boom — in the resale of diamond engagement rings that some want to unload, and others want to buy cheaply.
This week brings another round of quarterly earnings for companies, which are expected to buoy this latest stock market rally. They’ll be largely down from last year — except for pandemic winners like Amazon — but not as badly as once feared. Megabanks JPMorgan Chase and Citigroup both beat analysts’ expectations with their earnings released this morning.
2. Stimulus Forecast Hazy Until Spring
For months, Washington’s leaders have been negotiating a second major stimulus package to follow on the CARES Act from May. Trump has roared back with new gusto (well, new tweets) in recent days, and the White House and House Democrats could likely strike a deal somewhere in the $1.8 trillion range — but Senate Republicans are balking at any more spending. With precious few days until the election, this one will likely be punted until 2021. If Democrat Joe Biden wins, especially while taking a Senate majority, a much bigger relief package could move fairly quickly, but GOP opposition is likely to hold, dragging Biden’s first major legislative battle out for months. If Trump wins a status quo election, there might be room for a quick deal in the lame-duck Congress … unless there’s an apocalyptic court battle over the outcome.
3. But Wall Street’s Betting on It
Biden’s rising poll numbers are raising anticipation for a “blue wave” election, which would mean higher taxes on the rich and more regulation … but also more stimulus spending, which Wall Street likes, and the market is rising accordingly.
4. Vaccine Watch
The single most important factor for the stock market and economy as a whole is a safe and widely adopted coronavirus vaccine so we can go about our old lives again. The race continues with large-scale clinical trials for multiple candidates, with approvals expected in the coming months. Still, it’s important to remember that a workable vaccine doesn’t instantly make it February again. By spring, experts say, you could have the choice of several so-so vaccines — and still need to practice mask wearing and social distancing.