For the past few months, we’ve been talking a lot about the wealth gap. 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%.
In most ways, that wealth gap is getting bigger. But here’s the thing. In other ways, this generational inequality recently has shown signs of reversing.
Thanks to changes in the healthcare system, more Americans are insured. As of late last year, wages were growing faster than at any time in the past two decades. And most impressively, the economy added jobs for more than 100 consecutive months, putting unemployment at record lows.
Then along came COVID-19.
A Decade of Progress Wiped Out
In a month, the coronavirus wiped out all that progress.
U.S. GDP could decline by 14% in the second quarter, according to JPMorgan. That would be a swing from our longest expansion on record to our worst quarterly decline.
The number of jobless claims moved from 228,000 three weeks ago to an astounding 6.65 million last week. That number lifts the two-week tally of lost jobs to nearly 10 million — the biggest two-week jobs crash in recorded history.
And it’s likely to get worse.
Earlier this week, the Federal Reserve 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.
Now think about where so many of those job losses are coming from.
The face-to-face services and leisure sectors.
Restaurants and bars are either shut down or operating with skeleton crews. According to the National Restaurant Association, the U.S. restaurant industry has lost $25 billion in sales since March 1.
U.S. retail chains have closed nearly 50,000 stores. Hotels, if they haven’t been commandeered for healthcare purposes, are empty. Disney World and Las Vegas are shut down for the foreseeable future.
Many of these jobs — waiters, desk clerks, groundskeepers, maids — pay an average wage of less than $30,000 per year. The average American makes about $47,000 a year.
And unlike office jobs, these folks can’t work from home.
A Zoom (NYSE:ZM) account can’t help you if you deal blackjack at the Bellagio or operate the Indiana Jones ride at Disneyland.
Thanks to the coronavirus, the wealth gap has become a canyon.
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 counteract the operational risks of the next global pandemic by shifting more of their processes to automation, robots, and/or artificial intelligence, rather than human beings.
In other words, technology will keep making the wealth gap bigger.
I call this the “Technochasm” — and it’s a trend we keep hearing about…
Signs of a “Jobless Future?”
In a paper by Oxford academics Carl Benedikt Frey and Michael Osborne, the researchers estimate that 47% of American jobs are at high risk of automation by the mid-2030s.
According to Oxford Economics, up to 20 million manufacturing jobs worldwide will be lost to robots by 2030.
McKinsey Global Institute says that more than 25% of rural American workers are under threat of job loss due to such technologies. The outlook isn’t much better in urban areas, where nearly 20% of workers could be replaced by tech.
Now, maybe these reports are just fear-mongering. Maybe we’ll keep creating new industries and jobs, as we did following the Industrial Revolution and other periods of upheaval.
Whether or not we’re headed to some sort of “jobless future” is unknowable.
Moreover, while people may lose their jobs to automation, they’ll certainly survive this Technochasm – whether through scraping together enough “gigs” to put food on the table or measly government handouts.
But to me, survival isn’t good enough. I bet you feel the same way.
You want to thrive. You can do so by making 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 out my on-camera segment, which we’ve posted on our website, here…
I’ll see you back here soon.
P.S. The stock that could be my next 1,000% stock market winner recently went public. It’s a company I can almost guarantee you’ve never heard of, but it’s already one of the most profitable businesses on Earth. It’s a remarkable story… which is why I just put together a detailed analysis that explains the entire situation and reveals the company’s name and stock market ticker symbol, totally free of charge.
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends … before they take off. And when it comes to bear markets, you’ll want to have his “blueprint” in hand before stocks go south. Eric does not own the aforementioned securities.