Jobless toll hits stunning heights
Nearly 4 million more file for unemployment in U.S.
Economic shock waves from the coronavirus pandemic and shelterinplace orders continue to devastate American workers: 3.8 million people filed new unemployment claims last week, the U.S. Labor Department said Thursday.
Although the number for the week ended April 25 was less than the stunning 6.9 million newly jobless reported in a single week in late March, it still shows extensive blows to the economy. The total claims nationwide for the past six weeks now stand at 30.3 million, an unprecedented surge.
Experts agreed that figure doesn’t capture the full scope, as many claimants still struggle to reach overwhelmed state unemployment departments, while freelancers, gig workers and selfemployed people have been waiting for states to create systems so they can file for benefits. California only began accepting such claims under a federally funded program this week.
“It’s unlike anything that any of us has ever
lived through,” said Susan Lund, a partner at consulting firm McKinsey Global Institute. “You have to go back to the Great Depression to see this level of unemployment — and the speed with which it came about is stunning.”
Job cuts started in service occupations at restaurants, hotels, airports and retail stores — places that lost customers to travel bans and plummeting demand even before shelterinplace orders closed many businesses. Now they’re cascading to additional sectors, even ones that are still operating, according to a McKinsey report Lund coauthored.
“As the weeks roll on, you see the impact of reduced consumer spending,” Lund said. Manufacturing, business services, nonessential health care and professional services are all now seeing job losses.
The Bay Area’s tech sector, which seemed to have a Teflon coating that repelled economic dips, is increasingly feeling the pain. This week Lyft announced layoffs for 17% of its staff and Uber acknowledged it is mulling job cuts. Yelp and Eventbrite, Opendoor, Lending Club, Zenefits, Patreon, GoPro, the Real Real and VSCO have all laid off workers.
“You can’t sustain top performers on the larger salaries and everything that comes along with that,” said Cristin Culver, formerly the head of local communications at real estate tech company Opendoor before she was laid off on April 15.
“The longevity and sustainability of the business had to be prioritized,” she said, adding that other tech companies are facing the same decisions as Opendoor.
Culver said the company provided her and others with a generous severance package.
“High performers can be victims of their own success in a recession,” she said, noting that she received multiple raises and promotions during her almost three years at the company — making her more vulnerable to being laid off. “Expensive people become more of a glaring line item,” she said, adding that marketing departments are among the first to be jettisoned at the first sign of choppy economic waters.
That is true for even giants like Google. The Mountain View internet company reportedly plans to cut up to 50% of its marketing budget for the second half of the year along with announcing a hiring freeze in some departments.
In California, Gov. Gavin Newsom said the state has received 3.7 million new claims for unemployment since mid-March. The Labor Department numbers, which only reflect claims that were fully processed, showed 328,042 new California claims for last week. The Employment Development Department said it paid out $1.2 billion in claims on Monday — 10 times the daily peak recorded in April 2010, as the state’s economy climbed out of the 200709 recession.
Workers’ financial suffering — through permanent layoffs, temporary furloughs, reduced hours and/or salary cuts — will continue to mount, according to the McKinsey report. It estimates that ultimately up to 57 million U.S. jobs could be vulnerable to such actions during the shutdown, meaning the number of affected jobs could almost double.
But Mark Zandi, chief economist at Moodys.com, took a more upbeat approach.
“I think the worst of the hit — the biggest job losses, the highest unemployment — is the month of April,” he said. “Then businesses will restart, whether it’s a good idea or not. In May, you could actually see no job loss.”
Still, in the Bay Area, shelterinplace orders are extended at least through the end of May, which means that ripple effects could continue.
Jerry Nickelsburg, director of the UCLA Anderson Forecast, which does economic modeling about California, is also optimistic, noting that the federal Paycheck Protection Program — a forgivable loan that gives small businesses incentive to keep their workers employed — should help. However, many small businesses say the program is difficult to access.
“New unemployment claims were mostly due to firms shutting down because they were mandated to, or because people sheltered in place,” Nickelsburg said. “You would expect that to be mostly done.” Surging unemployment claims “are due to taper off.”
But a new deluge is likely to show up in next week’s data, which will include California’s first wave of unemployment claims from gig workers, freelancers and selfemployed people.
Under the Pandemic Unemployment Assistance program, such workers are eligible for joblessness benefits for the first time. California started accepting those claims on Tuesday.
Newsom said that about 190,000 Californians applied to the assistance program on the first day it was available, on top of 45,000 people applying for unemployment from losing traditional jobs.
Most other states also have had to devise new systems to handle claims from freelancers. With millions of Americans selfemployed as independent contractors, freelancers or gig workers, experts said it’s likely that they will add to the floods of claims.
Even when there aren’t layoffs, hiring has slowed or halted for many occupations, McKinsey found, naming oil/gas operations, food machine operators, bakers, bellhops and car insurance appraisers as occupations with the biggest declines in new job postings.
All the increases in job listings were in the medical field: medical translators and interpreters, respiratory therapists, general practitioners, psychiatrists and epidemiologists.
Ironically, medical workers who aren’t directly involved with COVID19 care are now losing jobs and pay. Stanford Health Care, for instance, last week gave its 14,000 staffers the choice of a 20% pay cut, using paid time off or taking unpaid leave during the 10 weeks starting April 27.
Other nonessential medical professionals are also impacted. Cathy Oleson, a parttime dental hygienist in Los Gatos, has been unable to work for weeks. Her employers can only see patients in an emergency. She collects $1,050 each week in unemployment insurance money — the California maximum of $450 plus a $600aweek boost from the federal Cares Act.
Oleson sees her employers facing difficult decisions as rent comes due and other business expenses pile up with no revenue coming in.
“We told the landlord that we couldn’t pay or that we wanted to delay,” said C. Rodney Rosland, a dentist and one of Oleson’s employers. “He wasn’t very happy about that.”
Rosland said he paid his portion of the April rent for the office he shares with another dentist and worries about having money to reopen when shelter in place orders are lifted.
“We’re not running from the obligation, but we’re concerned about having working capital when we get back,” Rosland said.
Still, after many years in practice with no loans to pay for education or launching a business, Rosland said he’s in better shape than newly minted dentists.
“We’re talking hundreds of thousands of dollars” of debt for some dentists who now have no income, Rosland said.
He hopes to receive support through the federal loan program but has not received any money after applying in early April.
Culver from Opendoor said she has already started interviewing for new jobs. This is not her first layoff as a 13year veteran of the technology industry. She counts herself lucky that she can take her time in the search.
“I think it will be an opportunity,” she said.