More layoffs could become permanent
Continued uncertainty hurts hopes for rebound
When Stephanie Clark was temporarily laid off from her administrative job for the city of Henderson, Nevada, on March 10, she was told she would be called back the next month.
In early April, she was again assured that she would be rehired the following month. But on May 1, with the city’s finances pummeled by the shutdown of neighboring tourist mecca Las Vegas, Clark was permanently let go.
“I was blindsided,” said Clark, 55, who worked as a program director for the city’s department of economic development and tourism.
Clark is not alone. There are signs the initial burst of job gains from May through July may have played out and as many as half of temporary layoffs and furloughs could become permanent, according to some economists’ estimates.
“Our expectation is that the initial employment rebound is basically over and that job gains will be minimal through the end of the year,” said econo
mist Dante DeAntonio of Moody’s Analytics. “More temporary layoffs will become permanent.”
Of the 22 million jobs shed in March and April, 9.3 million have been recouped over the past three months, Labor Department figures show.
The vast majority of those payroll gains came from workers on temporary layoff or furlough who have been rehired
as states allow shuttered restaurants, shops and other businesses to reopen in phases. In April, 18 million workers said they were on temporary layoff, a figure that fell to 9.2 million by July.
Meanwhile, the number of workers who said they were permanently laid off jumped from 1.5 million in March to 2.8 million in June, with the total roughly unchanged last month. In July, 56% of unemployed workers said they were temporarily laid off, down from 78% in April but signaling that rehiring still could make up a big portion of payroll gains in coming months.
Yet DeAntonio says the numbers don’t necessarily provide a clear picture. Traditionally, a worker classified as on temporary layoff must have been given a return-to-work date or expect to be recalled within six months. Given the uncertainty of the health crisis, department survey takers are categorizing workers as temporarily laid off “even if they are uncertain when they will be able to return to work,” DeAntonio said. Or, in many cases, if they’ll come back.
The good news is that businesses have rehired millions of workers in recent months, largely as a result of government aid. The federal government’s Paycheck Protection Program has provided forgivable loans to small businesses that retained or rehired workers to cover payroll and other costs for two months. And restaurants, malls and other outlets have brought some additional workers back as they’ve reopened, with more states gradually permitting indoor dining and increasing customer capacities.
But 84% of small businesses have exhausted their PPP loans, up from 71% in July, according to a survey out this week from the National Federation of Independent Business. That’s prompting a new wave of permanent layoffs, economists say.
Meanwhile, many states in the South and West had to pause or reverse their reopening plans amid COVID-19 spikes. And many businesses are struggling even in states that are reopening aggressively as consumers shy away from crowded public places out of contagion fears, prompting them to bring back some but not all laid-off workers.
“People have to feel comfortable with the health risks,” said Daniel Sternberg, head of data science for Gusto, a payroll and benefits provider to more than 100,000 small businesses. “Until the health crisis is solved, you’re not going to see revenue get back to where it was before.”
Clark says she understands that the shutdown of Las Vegas resort casinos has battered local hotel tax revenue, along with other income. But she thought she could have been transferred to another city department. Las Vegas hotels and casinos began reopening in June.
She got unemployment benefits that slightly topped her salary until a $600 federal supplement expired late last month. Fortunately, she says, her husband works, allowing the couple to pay their bills. Meanwhile, she has applied for several hundred jobs but landed just two interviews.
“What am I going to do at 55?” she asked. “I just think a lot of companies are not hiring me because of my age.”
Sternberg says he believes the rehiring of furloughed workers has “plateaued” after the initial wave spurred by the PPP loans. “If I’m a restaurant getting 60% of my pre-COVID revenue in a high cost-of-living city, I’m out of business.”
More business closures would trigger still more permanent layoffs.
So how many furloughed workers will lose their jobs?
Twenty-two percent of employees furloughed from March through June were permanently let go by the end of July, according to Gusto’s payroll figures.
A recent Goldman Sachs analysis of Labor data found that the share of furloughed workers who were permanently laid off nearly doubled from 3.7% in June to 7% in July.