The coronavirus pandemic has rocked the U.S.economy in myriad ways. One of the most important has been the impact on economic inequality, which has been spotlighted by top economists, including Fed chair Jerome Powell.
Why it matters: It is a growing subject of discussion among everyday Americans and carries weight among economists, namely because persistent or increasing inequality can cast doubt on the fairness of America’s economic system and undermine the sustainability of economic growth.
What it is: Unlike the well-known Gini coefficient, the Morning Consult/Axios Inequality Index does not measure the distribution of income or wealth, it measures the movement of inequality — how much it has increased or decreased based on four important economic variables detailed below.
- The index measures economic outcomes across income groups on a monthly basis to show whether the U.S. is becoming more or less economically equal.
What it says: Having tracked data through Morning Consult's daily surveys of 260,000 Americans per month, the index shows that inequality decreased for most of 2021, but picked up in May.
What it means: "We had unprecedented stimulus in December and then again in March and over that period of time we’ve seen the Morning Consult/Axios Inequality Index decrease ... but we’re now at a point in May where the sugar high from the second and third stimulus has worn off," Morning Consult chief economist John Leer tells me in an interview.
State of play: Following the passage of the $1.9 trillion American Rescue Plan in March inflation worries have grown and Congressional Republicans have pushed back against big-spending stimulus measures, even President Biden's infrastructure proposals, which are paid for by fees and increased taxes on the wealthy.
- That makes another stimulus package unlikely and could mean that in September when enhanced unemployment benefits and eviction and foreclosure moratoriums expire many of the nation's low-income residents will be on their own and facing major liabilities.
Be smart: "The way policymakers had hoped this would play out is we would have the December stimulus and then the American Rescue Plan that would jump-start consumer spending and that would result in an increase in employment, which would be sustained as the economy reopened over the summer," Leer says.
- "Given the disappointing jobs report that we saw last month and decreases in retail spending in April as well it’s unclear that we’re in this self-sustaining economic recovery mode right now."
The bottom line: The index is showing that without another lifeline lower-income Americans could be in for a difficult 2021, which would challenge the lofty growth expectations economists and asset managers have laid out for this year.
- "We’re at another turning point where we had these four months of decreasing inequality and now we can see how the economy responds in the absence of such intense fiscal intervention," Leer adds.