After two lost decades, U.S.'s weakest local economies may face worse
from pandemic
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[October 14, 2020] By
Howard Schneider
(Reuters) - A decade-long economic
expansion did little to narrow the gaps between the United States'
prosperous and ailing areas, with thousands of "distressed" zip codes
shedding jobs and businesses in a trend that laid the groundwork for the
developing "K" shaped recovery from the coronavirus pandemic.
New analysis from the Economic Innovation Group studying economic
patterns across roughly 25,000 zip codes showed that from 2000 through
2018, already prosperous areas pulled further ahead, capturing
disproportionate shares of the jobs created and the new businesses that
were formed.
For 5,000 or so "distressed" zip codes it was by contrast a period of
lost opportunity as they fell further behind, with the number of jobs
declining even deep into the recovery, and those that remained more
concentrated in industries and occupations likely to have been disrupted
by the pandemic.
Economists analyzing the U.S. path to recovery are worried that inside
national measures of economic growth lie deepening divisions between
industries and people as some sectors recover fast, while employment in
the leisure and hospitality industry, for example, remains 20% below
where it was in February.
Such service sector workers, the EIG found, made up a disproportionate
share of workers in areas already falling behind economically.
"Communities that were already vulnerable going in, that had already
been largely overlooked by the period of growth preceding the pandemic,
are the most vulnerable to its effects," said EIG President John
Lettieri.
Within the roughly 5,000 worst-off zip codes nearly a quarter of working
adults were employed in service occupations as of 2018.
By contrast, in prosperous zip codes only 13% of employed adults were in
service jobs, while half were in management or professional occupations,
a group of jobs considered more adaptable to work-from-home
arrangements.
The study combines a variety of statistics on education, poverty rates
and employment into an index that divides U.S. zip codes into five
groups, with the top 20% considered "prosperous" and the bottom
considered distressed.
Graphic - Little change for the left behind:
https://graphics.reuters.com/
USA-ECONOMY/
DISTRESS/
bdwvkjrrrpm/chart.png
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A man wearing a mask
walks past shuttered businesses on Broadway in the Manhattan borough
of New York City, U.S., April 25, 2020. REUTERS/Lucas Jackson/File
Photo
The study did document improvement. Around 33 million more Americans were living
in "prosperous," "comfortable" or mid-tier zip codes in 2018 than in 2000 -
prosperity that increasingly moved towards urban areas. Those zip codes also
became more ethnically and racially diverse, with the share of non-white
residents in prosperous areas rising from 16% to 26%. More Americans in
distressed areas are also graduating high school.
Graphic - Some upward movement:
https://graphics.reuters.com/USA-ECONOMY/DISTRESS/
yzdpxaooxvx/chart.png
But the gaps remained large. The number of Americans living in distressed areas
remained about 50 million, unchanged since 2000, and a disproportionate share
were Black and Hispanic. About 56% of Blacks and 45% of Hispanics lived in
economically distressed or at-risk areas.
Graphic - Racial gaps remain:
https://graphics.reuters.com/USA-ECONOMY/DISTRESS/
oakpenzzyvr/chart.png
From 2000 through February 2020, the United States went through two recessions,
one of them deep, but also had its longest measured period of uninterrupted
growth.
It did little to change the economic landscape, with roughly two-thirds of zip
codes remaining in the same category in which they started. With a third
recession sparked by the pandemic now underway, the divide may grow deeper.
"All of the gains have gone to higher tiers," said EIG research director Kenan
Fikri. "We have a chronic tail of distressed communities."
(Reporting by Howard Schneider; Editing by Andrea Ricci)
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