As COVID-19 cases continue spreading in the United States, we’re seeing it have a disproportionate impact on lower-earning Americans. On one hand, many low-income jobs, like restaurant servers, have simply been eliminated due to lockdowns. So, lower-income earners are feeling economic pain. On the other hand, the lower-income earners that still have jobs — think nurse-aids, grocery store clerks, or gas station attendants — suddenly find themselves at far greater risk of coming into contact with COVID-19. These individuals don’t have the luxury of working from home. It’s a bit like “pick which way you want to lose.” Meanwhile, many higher-earning Americans are both financially and physically insulated. Coronavirus is more of an annoyance than a real crisis. This divergence in fates is fueling “The Technochasm” — a name coined by our expert macro analyst, Eric Fry. Over the next decade, we’re going to see the Technochasm drive vast social change. It will also drive huge wealth creation — for those who align themselves accordingly. In today’s Digest, let’s turn to Eric’s update from this past week to learn more about how COVID-19 is impacting the Technochasm, and what it means for your money. Have a good weekend, Jeff Remsburg

 

As the Coronavirus Spreads, the Technochasm Widens

By Eric Fry

Back in late March, New York Governor Andrew Cuomo called the coronavirus “the great equalizer.”

“Everyone is subject to this virus,” Cuomo said. “I don’t care how smart, how rich, how powerful you think you are.”

When you look at who’s been infected with COVID-19 — everyone from Tom Hanks and U.K. Prime Minister Boris Johnson to nursing home residents and transit workers — you might believe Cuomo is correct in his assessment.

But he’s dead wrong.

With all things being equal, yes, the coronavirus does not discriminate. However, as we’ve been discussing here for several months, all things are far from equal.

While anyone can “get” the coronavirus, how it’s hitting us varies widely among income levels.

Indeed, instead of being an “equalizer,” COVID-19 is hitting people on the wrong side of the wealth gap especially hard.

First off, consider who can actually “shelter in place.”

Many high-income and upper-middle-class white-collar folks can work from home with little more than a laptop and an internet connections.

Working-class truck drivers, nurses and health aides, and grocery store and warehouse clerks, on the other hand, are front-line troops in the war against COVID-19.

So, it’s no surprise that crowded working-class neighborhoods in New York and elsewhere are some of the biggest coronavirus hot spots.

Moreover, the lower-income workers who aren’t on the front lines are the ones most likely to get laid off right now.

Millions of restaurant and non-grocery retail workers are now scrambling to pay this month’s rent. And they’re certainly not making plans for a beach week or trip home for Christmas.

And while the top executives at chain restaurants and retailers may now be sheltering in place at their beach homes, the entrepreneurs behind mom-and-pop shops are scrambling just as much if not more than their employees.

According to Moody’s chief economist Mark Zandi, more than 24 million Americans work in the five sectors that are at the highest risk for a major coronavirus slowdown: mining/oil and gas, transportation, employment services, travel arrangements, and leisure and hospitality.

And it trickles down from there …

For example, while white-collar workers on their home computers usually have the time and money to get meals and groceries delivered, blue-collar workers often don’t.

Delivery is often more expensive. And front-line workers often have to put off shopping till nighttime, when store shelves are picked over or empty.

Also, while the coronavirus has reinforced the importance of saving and holding onto a rainy-day fund, according to new research from UBS, 20% of households earning less than $60,000 are planning on saving less of their income over the next three months than they previously did.

At the same time, 28% of households that earn more than $200,000 per year are planning to save more.

Of course, as was true before COVID-19, high-earning households already tend to save more than low-earning households do.

That’s the wealth gap we’ve been talking about here, thanks to the coronavirus, continuing to widen.

Just as it has been for a generation or more.

Right now, the richest 20% of households in the United States own a whopping 90% of the nation’s wealth.

In other words, the middle class is shrinking as some people accumulate fortunes and others sink below the poverty line.

In 1980, the richest 1% of Americans owned about 30% of all household wealth in the country … and the bottom 90% owned about 24% of all household wealth.

But by 2012, the share of all household financial wealth owned by the top 1% had skyrocketed to more than 60% … and the share owned by the bottom 90% had plummeted below 10%.

 

It’s likely to get wider.

In the United States, more than 16 million new jobless claims were filed in the past three weeks.

And the Federal Reserve has estimated that coronavirus job losses could total 47 million … and that the unemployment rate could hit 32%. That would be a pivot from nearly full employment to Great Depression-era numbers.

That said, I believe we will beat COVID-19.

The economy will recover. Most people losing their jobs now will get back to work.

But longer term, many companies will prepare for the next

 global pandemic by shifting more of their processes to automation, robots, and/or artificial intelligence, rather than human beings.

In other words, as people keep losing their jobs due to technology … that technology will keep making the wealth gap bigger.

That’s the “Technochasm.”

However, you can act now in order to make sure you and your portfolio are on the right side of the Technochasm.

I recently brought along a film crew to produce a special video presentation so I could show you exactly what’s going on … and why this is so important.

Take a minute or two to check it out on our website, here …

I’ll see you back here soon.

Regards,

Eric Fry