Even as the pace of unemployment filings falls, worries increase.
Even as pace of jobless filings falls, worries rise
Another 1.9 million Americans filed for unemployment benefits last week, an astronomically high number in normal times, but a positive sign that the record pace of job loss from the coronavirus pandemic is slowing.
Yet the continued flow of unemployment filings, well beyond what is normally seen in a cyclical recession, could be a sign of deepening economic damage as companies that have already furloughed or laid off employees reach a breaking point, experts said. For some businesses, federal aid or the promise of local reopening plans simply aren’t enough to bear ongoing losses.
Erica Sladky lost her job when her employer gave up the ghost. Formerly a biotech engineer at South San Francisco’s MBP Titan, Sladky said the company furloughed a group of employees including her in April, because of the pandemic and other circumstances.
That temporary layoff became permanent on May 1, and she has yet to find another job, though she is hopeful.
“I’ve made it to three finalround interviews,” Sladky said. She counts herself lucky, since some Bay Area biotech companies are still hiring, and hopes to get a job offer soon. She has been on unemployment since April 15.
She doesn’t foresee joining any exodus from the area. Sladky describes herself as a “transient” with no firm home. She recently moved to the Bay Area from Nebraska to take the job at MBP.
“I’ve always wanted to live here,” Sladky said. “I’m not going to let COVID send me back home.”
Some large companies may be able to withstand economic shocks. But smaller and midsize companies like Sladky’s former employer may be folding, contributing
to the stubbornly high number of new unemployment claims each week, according to Jason Reed, a professor at Notre Dame University’s Mendoza College of Business.
“After two months of being on lockdown, you’re starting to see temporary furloughs and layoffs start to transition to more permanent layoffs,” Reed said.
He noted that while filings had declined since 6.8 million people sought aid in one week in March, recent weeks had consistently seen more than 2 million people request benefits.
“Two million is an astronomical amount of claims still being filed week after week,” he said, adding that 6 million Americans filed for unemployment during a threemonth period in the depths of the 200709 recession.
Since late March, 42.7 million have filed for unemployment, and as of May 23, 21.5 million remained on unemployment benefits. Though claims dropped 12% nationwide, they rose in California to 230,461 for the week of May 30, up 13% from the week before.
More than 5.6 million unemployment claims have been processed in California since the pandemic began, and a total of $3.4 billion in benefits were paid last week, according to the state Employment Development Department.
For companies to start bringing employees back to work, demand for goods and services must pick up. And that may not happen soon, according to Brian Wesbury, chief economist at First Trust Economics.
“Even if a salon or retail store is allowed to open, there’s a lot less demand than there was” before the pandemic, he said.
People leaving the job market because of child care needs or poor prospects for getting hired will also weigh on economic productivity, Reed said.
“We could see a consistent unemployment rate of 14%, but we could also see 4 million people leave the labor force,” he said.
Since the official rate reflects only people actively seeking work, that figure could hold steady without reflecting the millions who have stopped looking for jobs, Reed said.
Economists said at some point the labor market will stabilize with a more predictable number of new and continuing unemployment claims each week.
“The question is not only when do we bottom, but where do we bottom?” said Michelle Meyer, head of U.S. Economics at Bank of America.
“Is that continuing (unemployment) claims of 5 million or 10 million a week?” she said. “Is that the unemployment rate at 10%?”
The current job loss reflected a “forced hibernation,” she said. A stabilized job market will show the “residual damage,” she said.
Part of that will almost certainly include fewer jobs, even for skilled professionals like Sladky, the biotech engineer.
Sladky said the number of available jobs in her field has visibly decreased. She’s considering taking a lessskilled position, although it hasn’t come to that yet.
“At some of these biotechs there are operators or technicians,” Sladky said. Those roles pay less, but she could turn to them in a pinch: “I’ve contemplated doing that if it doesn’t work out.”