Company layoffs mount as pandemic heads into fall
Major corporations are laying off thousands of workers as the U.S. heads into fall facing a resurgent pandemic and deepening economic damage.
Disney, American Airlines and Allstate are among the prominent companies axing thousands of workers at a time when new federal aid and a vaccine are both unlikely anytime soon. The pain is even sharper among small businesses that have fewer resources or access to capital to weather the prolonged coronavirus recession.
“Companies held on to workers expecting a much more rapid recovery than has been possible,” said Julia Pollak, labor economist at job posting and recruitment website ZipRecruiter.
“It’s clear now to many of these companies that a swift recovery is not possible.”
Disney announced Tuesday that it would lay off 28,000 workers as the entertainment conglomerate suffers from a sharp decline in resort and theme park revenue.
American Airlines and United Airlines announced Wednesday they would lay off a combined 21,000 workers the following day without a bipartisan agreement for further aid.
Oil companies like Shell, Marathon and Halliburton have announced plans to cut thousands of workers as the energy sector reels from falling demand.
And the damage has extended to the financial sector, where insurer Allstate plans to cut 3,800 jobs and Wall Street investment bank Goldman Sachs plans to cut staff by 400 workers.
Those job losses will not be reflected in Friday’s employment report for September, the last one to be released before Election Day, but the pain they bring may be front of mind for voters as they head to the polls and mail in their ballots.
Before the pandemic, President Trump was well positioned to make the economy has strongest argument for a second term. That all changed with the coronavirus recession, but the Trump campaign has argued the recovery is moving in the right direction and that the president is a better steward of the economy than Democratic nominee Joe Biden.
But the rise in job losses comes as the labor market was already showing signs of weakness, and as millions of Americans who have already lost their jobs are in danger of losing government support systems.
“If you pull away someone’s flotation device, they usually don’t sink immediately,” said Martha Gimbel, senior manager of economic research at Schmidt Futures.
“But eventually, they’re going to start drowning, and you’re just seeing companies accepting the fact that they are not going to be able to get through another six months, year, year and a half — however long this takes — without permanent changes to staffing and how they do business,” she added.
The COVID-19 pandemic caused the quickest and deepest economic collapse since the Great Depression. The effects of the virus claimed more than 20 million jobs in March and April, wiping out a decade of job gains, and shrank the U.S. economy by an annualized rate of 31.4 percent between April and June.
The U.S. has since recovered 10.7 million of the jobs lost and the unemployment rate has retreated to 8.4 percent after spiking to 14.7 percent in April. Before the pandemic, the jobless rate was 3.5 percent.
The early stages of the recovery exceeded the expectations of some economists and policymakers, many of whom credit the record-breaking $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act signed by Trump in late March.
The CARES Act was intended to cushion the economic blow of the pandemic by expanding and increasing unemployment benefits, providing direct payments to households, and offering emergency loans to small businesses long enough to contain the virus. But most of that aid has washed out of the economy as the pandemic continues to rage, forcing some companies to cut workers they hoped to bring back.
Policymakers and economists have warned for months about the risk of permanent job losses piling up as major sectors of the economy remain closed. ZipRecruiter’s Pollak noted that while some industries such as home entertainment, medical products and home goods have benefited from the COVID economy, the overall labor market will likely decline as long as the virus persists.
“It’s sad for workers, who lose leverage in the labor market. It’s difficult for companies and employers that were expecting to see revenue and sales grow 20, 30 percent and are now facing a decline in revenues for the first time in many years,” she said.
Democrats and Republicans generally agree that some further support is needed for jobless workers and the struggling businesses that have laid them off. But while Democrats and liberal economists support another sweeping round of aid, Republicans and right-leaning analysts prefer a scaled-down package focused on reopening businesses as quickly as possible.
“The really tricky thing here is trying to find the right balance — saving lives and livelihoods,” said Rachel Greszler, a research fellow at the conservative Heritage Foundation.
“Allowing society to open in ways that are safe has proved a lot more helpful than the states that are imposing these excessive lockdowns that aren’t actually rooted in the data,” she added.
But Gimbel argues that economic activity remains depressed in states with fewer restrictions and higher coronavirus cases, underscoring the need for generous support until the health crisis is under control.
“You can reopen, but you can’t force customers to show up, and people aren’t going to consume services the way that we did before this pandemic until they feel safe,” she said.