New Layoffs Add to Worries Over U.S. Financial Slowdown
The American economy is being hit by a new round of layoffs, signaling renewed concerns over the course of the coronavirus pandemic and uncertainty about further legislative relief.
Companies like Disney, insurance giant Allstate and two major airlines announced that they would lay off or lay off more than 60,000 workers in the past few days. Without a new federal aid package to stimulate the economy, further cuts are expected.
With the election in a month’s time, an agreement has proven elusive. The final negotiations between the White House and Congress Democrats continued on Thursday, and House Speaker Nancy Pelosi did not rule out a deal with Treasury Secretary Steven Mnuchin.
Democrats are pushing for a $ 2.2 trillion proposal, while the White House has launched a $ 1.6 trillion plan.
After the business closings in the spring made 22 million people unemployed, the economy recovered in May and June with the help of stimulus money and rock-bottom interest rates. But the loss of momentum since then, coupled with fears of a second wave of coronavirus cases this fall, has worried many experts over the coming months.
“The layoffs are an additional headwind in an already weak job market,” said Rubeela Farooqi, chief economist of the US high frequency economics. “As long as the virus is not in it, this will be an ongoing phenomenon.”
Concern has grown as measures that helped the economy weather the initial contraction eased. After a weekly unemployment benefit of $ 600 per week expired, personal income fell 2.7 percent in August, the Commerce Department said Thursday.
In a separate report, the Department of Labor said 787,000 people filed new claims for state unemployment benefits last week. The total, not adjusted for seasonal fluctuations, was a slight decrease compared to the previous week, but still reflected the highest loss ratio in decades.
The most recent layoffs are not included in this number, nor are they reflected in the September data released by the department on Friday, the final monthly reading on the labor market before the elections. The report is expected to show a continued slowdown in recruitment, with barely half of job losses recovering in the spring, although estimates are more uncertain than usual.
“That’s not a good sign for the economy,” said Gregory Daco, chief US economist at Oxford Economics. “When you combine the layoffs with the drying up of tax aid, it points to very weak momentum in the final quarter of the year.”
More than 30,000 United Airlines and American Airlines workers’ vacation days began Thursday after Congress failed to find new help for the industry, despite the companies saying they would reverse the cuts if Congress and the Trump administration did one Would reach an agreement. A $ 50 billion bailout in March obliged airlines to postpone job cuts until October 1.
Allstate announced on Wednesday that it is laying off around 3,800 employees to cut costs. That’s around 8 percent of the roughly 46,000 employees Allstate employed at the end of 2019.
Houghton Mifflin Harcourt, one of the country’s largest book publishers, said Thursday that 22 percent of the workforce would be cut, including 525 laid-off employees and 166 who have chosen to retire. The company is a major supplier of textbooks and materials, a business that has been hit hard by school closings.
The Walt Disney Company announced Tuesday that 28,000 jobs would be cut, mostly in theme parks in Florida and California. Many of the workers have been on vacation since spring, but the company said it is making the cuts permanent because “uncertainty about how long the pandemic will last” remains uncertain.
Travel, entertainment, and leisure and hospitality employers have been hardest hit by the pandemic and are lagging behind even after other sectors of the economy reopen. The American Hotel & Lodging Association, a trade group, said that without new stimulus laws, 74 percent of hotels would lay off additional staff and two-thirds would be out of business in six months.
“We are in another phase of the recovery,” said Daco of Oxford Economics, and with demand for services from many companies falling below pre-pandemic levels, companies have no choice but to cut costs. ”
Consumer spending on goods – whether for immediate consumption such as food or longer-term such as household appliances – is now above the level before the pandemic. However, spending on services, which account for around two-thirds of the country’s economic activity, has continued to fall by around 8 percent.
The economic picture is not entirely bleak. Personal spending increased 1 percent last month and consumer confidence increased. The real estate market is in turmoil across much of the country thanks to low mortgage rates, and housing construction employment is up 2.1 percent from June to August, according to the Associated General Contractors of America.
For many Americans, the easing of economic growth means an unexpected return to the ranks of the unemployed.
When the pandemic broke out in March, Alex Stern was on leave from his job as a publicist at a PR firm in New York. He was recalled in May after the agency, which works with food and beverage companies, received a loan through the federal program to protect paychecks.
But the company struggled to stay afloat and Mr Stern was finally laid off on Tuesday.
To pay the November rent he has to borrow money from his parents, he said. He is considering moving back to his childhood home in Pennsylvania until he finds a new job.
“I don’t want to leave New York and it’s difficult because I’m almost 30 years old and I don’t know what to do next in life,” said Stern.
One of the ones hit by the Disney cuts is 29-year-old Taisha Perez, who worked part-time as a drummer at the Animal Kingdom theme park at Walt Disney World in Orlando, Florida for almost three years.
The job gave her both a steady source of income and time to pursue her passion, television. “It is honestly my favorite job I have ever had,” said Ms. Perez. “I loved putting smiles on people’s faces.”
When she went on vacation in mid-March after the pandemic, she thought she would only be unemployed for a few weeks. But on Tuesday, a text message from her union representative informed her that her job would not be returning.
“I was just in shock,” she said. “I could not believe it.”
Ms. Perez said she could pay her rent and utilities for the roughly $ 250 a week she receives in government unemployment benefits, but couldn’t afford additional expenses, like the car she needed after she broke down in March.
For those like Ms. Perez, who lost their jobs earlier this year, the end of $ 600 in unemployment benefits has contributed to financial hardship.
Joann Taylor, a 45-year-old catering coordinator at a McAlister’s Deli franchise in Houston, worked about 30 hours a week. But when the pandemic hit, her boss only got her ready for deliveries.
As a result, her hours were cut so severely – sometimes to two a week or none at all – that she qualified for unemployment insurance, including $ 300 a week of pre-tax Texas benefits.
But when the weekly $ 600 surcharge expired in late July, Ms. Taylor began paying her monthly bills, which included $ 1,240 rent, $ 180 electricity, $ 240 car payment, and $ 155 auto insurance.
Determined to care for her daughters, 6 and 14 years old, she used the time she was underemployed to obtain a license to sell life and health insurance. Now she’s looking for an agency to take over and hoping for a more stable income.
Until then, with no further help from Congress, Ms. Taylor is concerned about paying the rent and buying groceries.
“I have to go to every church around me and ask for help,” she said. “I’ll be standing in line with the kids because I can’t leave them at home. I will apply for help everywhere because there is no way I can allow us to become homeless. “
Coverage was contributed by Ben Casselman, Niraj Chokshi, Emily Cochrane, Alan Rappeport and Elizabeth A. Harris.