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The American economy is being buffeted by a fresh round of corporate layoffs, signaling new anxiety about the course of the coronavirus pandemic and uncertainty about further legislative relief.
Companies including Disney, the insurance giant Allstate and two major airlines announced plans to fire or furlough more than 60,000 workers in recent days, and more cuts are expected without a new federal aid package to stimulate the economy.
With the election a month away, an agreement has proved elusive. Last-ditch negotiations between the White House and congressional Democrats were continuing Thursday, and Nancy Pelosi, the House speaker, did not rule out an agreement with Treasury Secretary Steven Mnuchin.
Democrats are pushing a $2.2 trillion proposal, while the White House has floated a $1.6 trillion plan.
After business shutdowns in the early spring threw 22 million people out of work, the economy rebounded 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 left many experts uneasy about the months ahead.
“The layoffs are an additional headwind in an already weak labor market,” said Rubeela Farooqi, chief U.S. economist for High Frequency Economics. “As long as the virus isn’t contained, this is going to be an ongoing phenomenon.”
The concern has grown as measures that helped the economy weather the initial contraction have wound down. The expiration of a $600-a-week federal supplement to unemployment benefits was followed by a 2.7 percent drop in personal income in August, the Commerce Department said Thursday.
In a separate report, the Labor Department said 787,000 people filed new applications for state jobless benefits last week. The total, not adjusted for seasonal variations, was a slight decline from the previous week, but continued to reflect the highest level of claims in decades.
The most recent layoffs are not included in that figure, nor will they be reflected in September data to be released by the department on Friday, the last monthly reading on the labor market before the election. The report is expected to show a continuing slowdown in hiring, with barely half of the spring’s job losses recovered, although there is more uncertainty than usual around the estimates.
“This doesn’t bode well for the economy,” said Gregory Daco, chief U.S. economist at Oxford Economics. “When you combine the layoffs with fiscal aid drying up, it points to very soft momentum in the final quarter of the year.”
Furloughs of more than 30,000 workers by United Airlines and American Airlines began Thursday after Congress was unable to come up with fresh aid for the industry, though the companies said they would reverse the cuts if Congress and the Trump administration reached an agreement. A $50 billion bailout in March obligated the carriers to hold off on job cuts through Oct. 1.
Allstate announced Wednesday that it would lay off about 3,800 employees to reduce costs. Those are about 8 percent of the roughly 46,000 employees Allstate had at the end of 2019.
Houghton Mifflin Harcourt, one of the country’s largest book publishers, said Thursday that it was cutting 22 percent of its work force, including 525 employees who were laid off and 166 who chose to retire. The company is a major supplier of educational books and materials, a business hit hard by school closings.
The Walt Disney Company said Tuesday that it would eliminate 28,000 jobs, mostly at theme parks in Florida and California. Many of the workers had been on furlough since the spring, but the company said it was making the cuts permanent because of “the continued uncertainty regarding the duration of the pandemic.”
Travel, entertainment, and leisure and hospitality employers have been among the hardest hit by the pandemic, and they continue to lag even as other areas of the economy have reopened. The American Hotel & Lodging Association, a trade group, said that without new stimulus legislation, 74 percent of hotels would lay off additional employees and two-thirds would be out of business in six months.
“We’re in a different phase of the recovery,” Mr. Daco of Oxford Economics said, and with demand for many companies’ services stuck below where it was before the pandemic, “businesses are left with no other choice but to reduce costs.”
Consumer spending on goods — whether for immediate consumption, like food, or used over a longer term, like appliances — now exceeds levels preceding the pandemic. But outlays for services, which account for roughly two-thirds of the nation’s economic activity, remain down about 8 percent.
The economic picture is not completely bleak. Personal spending was up 1 percent last month, and readings of consumer confidence have been gaining. Helped by low mortgage rates, the housing market is on a tear in much of the country, lifting employment in residential construction 2.1 percent from June to August, according to the Associated General Contractors of America.
But for many Americans, the easing of economic growth has meant an unexpected return to the ranks of the unemployed.
When the pandemic struck in March, Alex Stern was furloughed from his job as a publicist at a public relations firm in New York. He was called back in May after the agency, which works with companies in the food and beverage industry, received a loan through the federal Paycheck Protection Program.
But the company struggled to stay afloat, and Mr. Stern was permanently laid off on Tuesday.
To pay the November rent, he will have to borrow money from his parents, he said. He is considering moving back to his childhood home in Pennsylvania until he can find a new job.
“I don’t want to leave New York, and it’s hard because I’m almost 30 years old and I don’t know what I’m going to do next in life,” Mr. Stern said.
Among those affected by the Disney cutbacks is Taisha Perez, 29, who had worked part time as a drummer at the Animal Kingdom Theme Park at Walt Disney World in Orlando, Fla., for nearly three years.
The job gave her both a steady source of income and time to pursue her passion, television acting. “It’s honestly my favorite job that I’ve ever had,” Ms. Perez said. “I loved putting a smile on people’s faces.”
When she was furloughed in mid-March after the pandemic hit, she thought she would be out of work for just a few weeks. But on Tuesday, a text message from her union representative told her that her job would not be coming back.
“I was just in shock,” she said. “I couldn’t believe it.”
Ms. Perez said she could pay her rent and utilities on the roughly $250 a week she receives in state unemployment benefits, but could not afford any extra expenses, like the car she needs after hers broke down in March.
For those like Ms. Perez who lost work earlier in the year, the end of the $600 federal unemployment supplement has added to financial hardships.
Joann Taylor, a 45-year-old catering coordinator at a McAlister’s Deli franchise in Houston, used to work about 30 hours per week. But when the pandemic hit, her boss put her in an on-call position for deliveries only.
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 in Texas benefits before taxes.
But when the $600 weekly supplement expired at the end of July, Ms. Taylor began struggling to pay her monthly bills, including $1,240 in rent, $180 for electricity, a $240 car payment and $155 for auto insurance.
Determined to provide for her daughters, who are 6 and 14, she used the time while underemployed to get a license to sell life and health insurance. Now she’s looking for an agency to take her on, hoping for steadier income.
Until then, without further aid from Congress, Ms. Taylor is worried about paying the rent and buying groceries.
“I will have to go to every church around me and ask for help,” she said. “I will stand in food lines with the kids, because I cannot leave them at home. I will apply anywhere that I can for help, because there’s no way that I can allow us to be homeless.”
Reporting was contributed by Ben Casselman, Niraj Chokshi, Emily Cochrane and Alan Rappeport.
Source: The NY Times
Keyword: New Layoffs Add to Worries Over U.S. Economic Slowdown