Businessweek Extra - Peter Atwater

in the economics department at William and Mary. And he's identified um the letter that kind of describes our economic recovery. He calls it a K shaped recovery. Some are doing well, some are not checking out. So I watched the world through the lens of confidence, and beginning in March, I noticed something really interesting. We all panicked together. You could see the collapse in confidence being spread across the entire economy.

Everybody felt it the same way. But the migration of people, professionals to the work from home environment, it put them very quickly on stable ground and then you could see their confidence start to rebound. We're out into the real economy, you know, small businesses, people working in the travel industry. It was very clear that there they were not on solid ground. In fact, for many of them, you could

start to see conditions getting worse. And at some point in April I started writing about it, and on Twitter somebody was talking about all the different letters and mentioned the letter K, and I thought, this is perfect. This is exactly what we're seeing, is that for some of the economy things are improving, and for others the deterioration has just been this very painful decline. And so, Peter, how much of this is new and how much of

it is exacerbating things that were already there. So I think if you were to step back and look at the recovery from the banking crisis, that itself was very much a case shaped recovery. You know, the financial markets took off very quickly as the FED went into overdrive.

But you know, one of the things that came out earlier today and the statements from from Chairman Powell and others, is that it took until very late in the cycle for the benefits of all of that trickle down to reach low income Americans and so I think we we've had this prolonged ten year case shaped recovery that has now been compounded by a very sharp rebound for some

and it's just others are left hanging. So is this our world, our new world economic reality Peter in that we're just going to have k recoveries or can we You know, as you said, the trickle down, the benefits trickled down very late, you know, coming off the financial crisis. How do we get it so that the benefit get

to everybody sooner on? So I think one of the things that we need to recognize is that from an economic perspective, we have to ensure that there is support for those at the low end, because we know that this condition lasted, it takes a long period of time. And in that process, I think Congress made a valiant effort. But this the attention to the relief efforts for the pandemic.

They were really oriented around a mindset that this was temporary and so unfortunately those that were, you know, the beneficiaries of that there, they started as early as late May beginning to wonder is this coming to an end? And from a confidence perspective, we need certainty. They need to know that these support mechanisms are going to be

in place until employment comes back. So Peter, as we think about a case shaped recovery going forward, what's the difference the inflection point or the chances I'm giving you so many scenarios here that it becomes just a shaped economy. Um, I think we're reaching a point where it has become so obvious that that almost prevents it from happening. Um. You know, if I look around in the financial markets, you see an extraordinary divide between big business and small business.

You see it in individuals, You see it in so many levels that you have stacked inequity on one end and stacked privilege on the other. And my my sense is that much of this is we're already seeing manifest in the social unrest around the country. Um. There's clear resonance to that sense of inequity. And you know, even people who can't articulate it feel that there is something unjust about the system as it exists today. And so I think this is even much more of a social

key issue as it is an economic one. And I think, you know, policy makers and leaders of business need to recognize that, Um, that lack of confidence that sense of hopelessness that many on the leg of the k are feeling is now motivating people to to to respond. So, Peter, you know, it's interesting that you say that. I have conversations with my young nieces who are in their twenties. You know, like God, capitalism is terrible and like no,

it builds things. It also provides you know, this is you know, where people can have opportunities to build a company from nothing and then give back, you know. So there are a lot of pluses to it, but yes,

it has created some massive inequalities in our systems. I am curious about some of the conversations you're having at William and Mary and what are the policies from your perspective as you studied, is that you think will make a difference, will reduce those gaps that currently exist in our society and have for a while and have just

been building and getting wider and wider. I think one of the things that has to be looked at is, you know, at the root of this in many ways goes back to the early nineteen eighties with that notion of shareholder um primacy. Then the shareholder came first, and as much as we want to enjoy the benefits of capitalism. I think that that that pendulum has shifted to such an extreme. And you saw it in news reports yesterday.

You know, Salesforce announces record earnings stock price stores and at the same time ten thou employees to be laid off. That's a very mixed message from capitalism, right, Well, so so what is it? You know, Business Roundtable has come out and said, Okay, there's multiple parties, matter constituents that we have to think about. But I don't know, it's a lot of talk, and I want to see whether or not takes change. What do I want to then

change start to happen. I mean, if you if you were to just look at you know, look at the NBA last night being forced to respond to you know, the social issues as they're manifesting around us. Yeah, I wonder, and I'm glad you said that. I wondered what you made of that, because there are, as you well know, a lot of economics underneath the big business of sports, the NBA and beyond, and you have seen those issues

collide in a really big way. Yeah. And and you know, if we go back to to the outbreak, you know, we we forget that the NBA, that the Jutah Jazz being infected with the virus. That was a critical tipping point in sentiment, and I and I looked to what's happened this week in much the same way that suddenly this feels very real to people, this this collective sense of inequity. Yeah, March eleventh, I mean that will be that.

It's interesting you say that because March eleventh was the day that the NBA shut down, also the day that we learned that Tom Hanks and Rita Wilson had the coronavirus. It all happened on the same day, I believe. I'm pretty sure I have that right. That changed everything. It was a game changer, right as a game changer. Um, But that speaks too, sorry, that speaks to this whole notion of confidence that you're talking about, and and perception

plays into that, Peter. It's entirely perception based, and it relates to our perceptions of certainty and control. And if you think about those that are on this leg of this K shaped recovery, they feel as if they have neither. They are voiceless, powerless, and the future feels very unclear. And that's that's such a difference to those on the arm. Hey, Peter, just have thirty seconds. Do you have hope that we can change, especially when a lot of these folks don't

have a place at the table. I I do have hope. UM. I think that that there are ways for us to bring back a greater sense of equity. Um. But it's going to require collective sacrifice. But remember, these are these are many of these are essential workers. You know, these are food providers, help there providers. They're critical to the system overall. And that's Peter Atwater. He's an adjunct lecturer in the economics department at William and Mary and talking

about the k shape recovery. That really describes so well our economic environment right now. Jason absolutely really enjoyed catching up with him, and also cool to know he listens to our show. You've been listening to Bloomberg Business Week Extra if you started tuning into Bloomberg Business Week Radio Live Monday through Friday at two pm Wall Street Time on Bloomberg Radio. I'm Carol Masser and I'm Jason Kelly. This is Bloomberg