About an hour ago, Joseph R. Biden, Jr. took the oath of office to become the 46th president of the United States. We wish him, vice president Kamala D. Harris, and all their administration every best wish in their new service to the United States.
Amidst today’s leadership change and ongoing pandemic struggle, there is no shortage of policy proposals in Washington, DC, and other global capitals. Over 2020, central banks and fiscal authorities marshaled historic actions to prevent the pandemic from unleashing another Great Depression. There is almost a cacophony of policy proposals and envisioned impacts: some aimed at repairing the damage of the pandemic, others targeting prepandemic structural challenges, and still others pursuing new goals with new focuses.
But how are we to assess success from whichever combination of policies ends up being implemented? If we go out two years or four years or longer, how will we gauge whether the Biden-Harris administration or the new 117th Congress have improved things?
This missive provides a simple scorecard for the American economy, to rise above the current din and clarify where we should look for progress. Our scorecard focuses on the heart of the American economy—workers and their families—and it has three main measures: jobs, incomes, and net worth. The overall economic well-being of the average American depends on whether she or he has a job, on how much income is earned in that job, and on what stock of financial wealth has been built up. Each of these measures we summarize with a reference point that speaks to the economy’s peak performance before the pandemic struck, using the timeliest U.S. government data that is publicly available. In addition, for each measure we discuss important distributional considerations—especially by gender and by race and ethnicity.
The heart of the American economy is its workers. And in February of 2020, the month before the pandemic shut down large swathes of America, there were a record 152.5 million payroll jobs in the United States. The overall unemployment rate that month stood at just 3.5 percent, a 50-year low. There were similar lows in the unemployment rates for Blacks and Hispanics, at 5.8 percent and 4.4 percent, respectively.
Then the pandemic hit. At its lowest trough, total payroll jobs had fallen by 22.2 million—a loss of about one in every seven jobs—to just 130.3 million. At the time of writing, through December 2020 total U.S. payroll jobs had risen to 142.6 million. This means there are still 9.9 million fewer U.S. jobs than there were at the prepandemic peak.
It will be important not just to build back jobs, but also jobs for underrepresented minorities and for women. … America needs to create the nearly 10 million jobs it is still down from its postpandemic peak.
Pandemic job losses have not been equally borne across all worker groups. Today the 9.9 percent and 9.3 percent unemployment rates for Blacks and Hispanics are about double their respective prepandemic lows. In the pandemic, 2.2 million women have departed the labor force versus just 1.1 million men. It will be important not just to build back jobs, but also jobs for underrepresented minorities and for women.
So, what will success look like in terms of jobs? First and foremost, America needs to create the nearly 10 million jobs it is still down from its postpandemic peak. In 2019, job growth averaged 178,000 per month. At a more-optimistic rate of job growth of 200,000 per month, it would not be until roughly Inauguration Day 2025 when the United States returned to its previous jobs peak. The first primary measure of our scorecard is this: how many payroll jobs are there in the U.S. economy, and how quickly are these jobs being created to get back to—and exceed—our prepandemic tally?
Beyond the total number of jobs, we should care about the gender and racial composition of those jobs as well. What policies can reverse the disproportionate labor-force exit of women and the disproportionate increase in unemployment for Blacks and Hispanics?
The economic well-being of workers and their families depends not just on whether they have a job, but also on the income earned at that job. Each September, the U.S. Census Bureau reports total income of households from all pretax sources. This is our second main scorecard measure.
In 2019, U.S. median household income was $68,703, an all-time high. This was a sizable 6.8 percent greater than it was in 2018, a leap that was driven partly by higher earnings for each worker and by a greater number of (at least part-time) workers in many households—all a reflection of the strong overall labor market the U.S. was enjoying on the eve of the pandemic. Beneath this median across all households lies a marked degree of racial inequality. In 2019, median income for White, non-Hispanic households was $76,057—versus just $56,113 for Hispanic-headed households and $45,438 for Black-headed households.
What about growth in incomes? In this first generation of the 21st century, median household income had been growing very slowly. In 1999 this measure stood at $62,641; by 2018 it had increased by just 2.7 percent, to $64,324. That translates into an average annual increase of about $89—a modest dinner out once a year for that household.
So, how to assess this second measure on our scorecard? America entered the pandemic at a record level of median household income—but after a generation of very slow growth, with a one-year spike of uncertain durability, and with many persistent measures of inequality beneath this overall median. Almost surely, the pandemic’s massive loss in jobs, hours worked, and wages will have driven median household income in 2020 markedly lower than its 2019 peak. It will be important to track indicators such as how large the decline is in 2020, whether that decline continues in future years, and how fast—and how broadly—the recovery is in the years beyond that. More years of poor income growth for American families will almost surely fuel continued political fractiousness in America.
Finally, the economic well-being of workers and their families depends on their net worth. Wealth for families provides security and opportunity: security against unexpected shocks, like a spell of unemployment, and opportunity to invest in human capital—such as college education—or in other assets that boost future net worth. Every three years, the Federal Reserve Board conducts a survey of U.S. families to assess what assets they own, what liabilities they owe, and thus their overall net worth. This is our third main scorecard measure.
In 2019, median family net worth stood at $121,700. This was about 18 percent higher than its 2016 level of $103,500. And yet, this amount was about 2.8 percent below its 2001 level of $125,300—and about 18.5 percent below its peak level reached in 2007, of $149,400.
The coronavirus pandemic has created human loss of historic proportions. That tragedy need not be compounded by economic loss of historic proportions.
As with income, so, too, with net worth there are striking inequalities by race and by overall economic position. In 2019, families with a White non-Hispanic respondent had a median net worth of $188,200—in contrast to $36,200 for Hispanic families and $24,100 for Black families. Grouping families by each net worth finds even broader inequalities. 2019 median net worth of the bottom quartile of families was $300; for the second quartile it was $57,300; for the third quartile it was $224,100; and for the final quartile up to the top tenth it was $652,700—with a median net worth of that top tenth of nearly $2.6 million.
So, how to assess this third measure on our scorecard? As with household income, so, too, with family net worth did America enter the pandemic having endured a generation of little progress.
The median family in 2019 had a net worth that was lower than it was in not just 2007, before the world financial crisis, but as far back as 2001. Indeed, for the bottom three quintiles, which together constitute nearly 100 million families, median net worth in 2019 was lower than it was in 2001. And for generations, there have been persistently lower levels of net worth for Hispanic and Black families. Wealth distribution in the United States has long been quite skewed, and the recent increase in aggregate net worth of U.S. households has been quite concentrated in initially wealthy households. In 2019, about 48 percent of Americans did not own any stocks—directly or indirectly.
Coming out of the pandemic, it will be essential to track how fast—and how broad—the recovery is in the net worth of U.S. families. More years of poor wealth creation for American families will almost surely fuel continued political fractiousness in America.
The coronavirus pandemic has caused human loss of historic proportions. That tragedy need not be compounded by economic loss of historic proportions. But clear and simple measures of how American workers and their families are faring in the years ahead will be essential to assessing all the policies already undertaken and sure to come. Our postpandemic scorecard outlined here can provide us all with a way to assess the net impact of all these policies on what matters most.