Layoffs continue as US jobless claims remain high

WASHINGTON - A grim portrait of the U.S. economy is emerging more than six months into the pandemic, as a cascade of new layoffs announced this week puts pressure on an already strained labor market and further raises the specter of an economic U-turn with the recovery only partially underway.

The parade of bad news has picked up in recent days, with several large companies announcing wide layoffs.

Disney announced it would lay off 28,000 from its theme park division, insurance company Allstate said it would cut 3,800 positions, and the airline industry, already battered by months with levels of consumer demand, saw more than 30,000 additional furloughs at American and United Airlines.

The economy and parts of the labor market appeared to pick up momentum in May and into the summer, gaining back just under a half of the 22 million jobs lost between February and April because of the pandemic. The jobs report released on Friday will provide a snapshot of the labor market in early September, but the scale of layoffs since then is a potential sign of new head winds in the economy.

With just weeks to go before the election, a range of industries are now under severe pressure as the effects of the pandemic continue to filter deep in the global economy. Continental, the German tire company, announced plans to cut as many as 30,000 jobs worldwide, and Marathon Petroleum has also begun a new round of layoffs. Royal Dutch Shell announced cuts of as many as 9,000 jobs.

And more layoffs are encroaching into white-collar jobs that are not directly affected by the pandemic or shutdown.

Unemployment data released by the Labor Department on Thursday did little to assuage fears about the recovery’s fragility: 837,000 initial claims for unemployment insurance were processed last week. That figure has come down steadily from its peak in late March and April, but it is still higher than any other period before the coronavirus pandemic.


Another 650,000 people had new claims processed for Pandemic Unemployment Assistance last week, the program for self-employed and gig workers, up slightly from 630,000 the week before.

The total number of people claiming unemployment insurance ticked up slightly, to 26.5 million for the week ending Sept. 12.

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The unemployment rate was 3.5% in February but then jumped quickly to nearly 15% in April as U.S. employers laid off more than 20 million people due to the coronavirus pandemic. Employers have added back a portion of the lost jobs since then, but tens of millions of Americans remain unemployed or underemployed.

State and local governments and businesses have struggled to come up with consistent plans for reopening the economy. The coronavirus has already killed more than 200,000 Americans and rates of infection remain high in many areas. Public health officials are also worried about another spike in the virus later this year, which could constrain the economic recovery even more.

President Donald Trump has claimed that the economy is roaring back to life, but the string of new layoff announcements show how some companies are having trouble finding their footing and adjusting to a weaker demand for their products and services.

“There is clearly a stalling out in the improvement in the domestic labor force,” said Joseph Brusuelas, the chief economist at RSM. “In particular, the rise in the number of persons on unemployment insurance and the increase in the number of people on PUA need to be monitored, because that signals we’re likely to have a sustained issue over the next couple of years inside the labor market, particularly pertaining to transportation, leisure, hospitality in general, aviation and hotels in particular.”

There are several reasons for the new rounds of layoffs.

Travel and tourism has plunged during the pandemic, reducing the demand for services like flights, hotels, theme parks, and convention centers to a fraction of what they were before the pandemic.

Industry experts said the crisis was already deeper and more intractable than other recessions that have come before it.

Sara Nelson, the president of the Association of Flight Attendants union, said that about half of the group’s approximately 50,000 members had been furloughed or were on some type of leave, mostly unpaid, with the prospect of more pain on the horizon.

“That’s the state of the airline business right now, without more economic assistance from the government,” she said. “If you let the market take care of this, you’re sending that many more people to unemployment lines and cutting off health insurance in the middle of the pandemic.”

Whereas the airline industry experienced a roughly 2 to 3% yearly contraction after both 9/11 and during the Great Recession, the drop this year will likely be closer to 66% - in a best-case scenario at this point, according to Richard Aboulafia, an aerospace analyst at the Teal Group. And that’s assuming more improvement in the last three months of the year.

“The damage to the aviation industry in terms of layoffs and revenues I think has just begun,” Aboulafia said. “It’s going to take a while to play out. ... You’ll see further damage not just to airlines but also to aircraft manufacturing.”

The title of a report Aboulafia just wrote summed it up: “About As Bad As We Feared. Maybe Worse.”

Nelson said that not only was there less job loss after 9/11, but there were more opportunities to rebound.

“Flight attendants went and worked in hospitality restaurants, retail and got other careers,” she said. “There are no other places for people to go now but the unemployment line and the bread line.”


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With about 700,000 passengers a day - air travel is stuck at around one-third of its typical rate.

Another reason the labor market is facing new pressure is because emergency government aid programs for businesses and households have mostly expired, leaving Americans with less spending money.

The Commerce Department on Thursday reported that personal incomes fell $543.5 billion, or 2.7% , in August and that disposable personal income also fell. Consumer spending, meanwhile, grew 1% in August. Consumer spending is typically seen as the biggest engine in the U.S. economy.

Other real-time data has begun to paint a picture of not just stagnation, but decline.

Homebase, an employee scheduling company, said that its metrics - the number of employees working, hours worked, and businesses open - declined in September for the first time since the onset of the pandemic.

U.S. employers announced another 118,000 job cuts in August, according to the outplacement firm Challenger, Gray & Christmas, bringing the yearly total to more than 2 million - the highest ever recorded by the firm.

Economists have started talking less about returning to a pre-pandemic normal, and more about what the new economy will emerge as entire industries have been shaken to their core.


“Clearly the covid shocks have led to an economy in transition,” said Chester S. Spatt, an economist at Carnegie Mellon University. “Even once we get back to full employment, the jobs aren’t going to be the same as the old jobs. People talk a lot about when we return to normal, but I don’t think normal is defined as the way we did things before.”

The White House and congressional Democrats are trying to negotiate another economic relief package, with talks continuing Thursday. Both sides say they want more small business aid, jobless benefits and stimulus checks, but they remain far apart on other issues. A deal doesn’t appear imminent.