Jobless picture may be grim till ’23
Although the first wave of reopenings is returning workers to restaurants, retailers and other businesses hit hard by the coronavirus pandemic, layoffs are seeping through sections of the job market that previously escaped major damage.
On Thursday, the Labor Department said more than 1.5 million Americans filed new state unemployment claims — the lowest number since the crisis began, but far above normal levels.
A further 700,000 workers who were self-employed or otherwise ineligible for state jobless benefits filed new claims for Pandemic Unemployment Assistance, a federal aid program.
The overall number of workers collecting state benefits fell slightly in the most recent seasonally adjusted tally, to 20.9 million in the week ended May 30, from a revised 21.3 million the previous week.
“We’re slowly seeing the labor market recovery begin to take form,” said Robert Rosener, an economist at Morgan Stanley, pointing to an “initial reopening bounce.”
But, he added, “there’s still an enormous amount of layoffs going on in the economy.”
On Monday, BP said it would lay off 10,000 people worldwide, mostly office-based workers. The entertainment promotion giant AEG told employees it would carry out layoffs, furloughs and salary reductions on July 1.
Job losses were announced this week at the University of Denver, the nonprofit group Uja-federation New York, and the city of Peoria, Ill., among others.
The weekly report on unemployment claims comes after the government reported jobs rebounded last month and that the unemployment rate fell unexpectedly to 13.3 percent.
Correcting for a classification error, the actual rate was closer to 16.4 percent — still lower than in April, but higher than at any other point since the Great Depression.
Federal Reserve Chairman Jerome Powell warned Wednesday that the economic pain could last for years and that there would be “a significant chunk” — millions of workers — “who don’t get to go back to their old job, and there may not be a job in that industry for them for some time.”
Powell said “it’s possible Congress will need to do more,” but a divide has arisen on Capitol Hill over whether to extend a $600 weekly supplement to state unemployment benefits beyond July 31, as Democrats advocate, or to pare or halt it, possibly replacing it with government incentives to return to work, as some Republicans have proposed.
Unemployment remained below 4 percent for much the year before the pandemic began. Reopening efforts will quickly reinstate a third of the workers who lost their jobs, said Beth Ann Bovino, chief U.S. economist at S&P Global. Hiring efforts, like a recent push by the broadband and cable company Charter Communications to fill thousands of positions, will help nudge the jobless rate down.
But a return to the labor market conditions that preceded the pandemic is unlikely before 2023, Bovino
said.
“We’re expecting a long haul,” she said. “When people start talking about a V-shaped recovery, it’s like claiming success with the patient still on the table.”
From March through May, 30 percent of lost jobs came in the food service industry, Bovino said. Ten percent stemmed from retailers.
But as states try to stoke the economy by gradually lifting restrictions on those businesses and others, the shock of the pandemic is increasingly reverberating through sectors like manufacturing and professional services.
With last week’s new filings, more than 44 million people have applied for state jobless benefits since mid-march. In addition, as of May 23, 9.7 million people were collecting Pandemic Unemployment Assistance benefits, the government said Thursday. Unlike the figure for state claims, the number for pandemic assistance is not seasonally adjusted.
In the third quarter, more employers than in the first half of the year expect to shrink payrolls, while fewer companies plan to increase hiring, according to a survey of 7,700 U.S. businesses by the employment agency Manpowergroup. Seasonally adjusted hiring plans are the weakest in a decade.
“These knockdown effects are starting to ripple through industries that initially seemed more secure, but are now facing a second wave of job losses,” Bovino said.
Some companies let employees go recently after suddenly losing major contracts. Others laid off workers who were furloughed and had expected to return to their jobs.
The construction engineering firm in Boston where Christian Lecorps was an electrical engineering contractor spent much of the spring operating as if the pandemic would end quickly, even mulling whether to hand out bonuses and raises, he said.
But work slowed in recent weeks. On Friday, Lecorps, 29, was laid off over Skype. On Tuesday, he dropped off his laptop at the office and began preparing to file for unemployment benefits.
Hunkered down in his mother’s home in Brockton, Mass., he hopes to use his spare time raising money for his startup, which aims to bring renewable energy to developing countries. But investors don’t appear to be in a spending mood. He fears that if he is unable to quickly replace his income, his credit may suffer.