Layoffs still high
WASHINGTON » The number of Americans seeking unemployment benefits dipped last week to a still-high 840,000, evidence that layoffs remain elevated seven months into the pandemic recession.
Yet economists say they are increasingly dubious about the unemployment claims figures, even though there is little doubt that hiring has slowed and employers have continued to lay off workers.
One reason layoffs remain high is that companies often hold on to workers when a recession begins, if they can, in hopes of outlasting the downturn. Yet if the recession drags on, many will eventually give up and cut jobs.
“Some of these new layoffs are coming from firms that didn’t want or didn’t have to lay people off at first,” said Constance Hunter, chief economist at KPMG. Now, “they have no choice but to start reducing their workforce.”
Consider Luke McCann. He had hoped through September that business would finally pick up at his online marketing company, CollectionAgencyMatch.com, based in WinstonSalem, North Carolina.
It didn’t. So McCann was forced to lay off seven of the 15 staffers at his company, which helps businesses find collection agencies. His revenue had shrunk as small businesses either closed down or decided not to pursue customers who hadn’t paid their bills, McCann said.
A loan from the government’s Paycheck Protection Program had helped McCann stave off cutting workers. But “without more (government help) on the way and demand not picking up, we had to lay off employees to help save expenses to stay in business.”
At face value, the Labor Department’s report Thursday indicated that more than 800,000 people are still being laid off each week, a historically huge number — more than in any week during the 2008-2009 Great Recession. Weekly applications for unemployment benefits have long been considered a proxy for job cuts.
But the flood of layoffs during the pandemic recession and the creation of some new jobless-aid programs have overwhelmed state unemployment agencies. A result is that the jobless claims figures the government has been reporting have become an object of skepticism. “We can’t view it as real-time job separation data,” said Elizabeth Pancotti, a policy adviser at Employ America, a left-leaning advocacy group, referring to layoffs. “We’re still seeing massive overcounting of initial claims.”