US economy may be stalling out as viral outbreak worsens
WASHINGTON — The U.S. economy is stumbling as the viral outbreak intensifies, threatening to slow hiring and deepening the uncertainty for employees, consumers and companies across the country.
Coronavirus case counts are rising in 38 states, and the nation as a whole has been shattering single-day records for new confirmed cases. In six states representing one-third of the economy — Arizona, California, Colorado, Florida, Michigan, and Texas — governors are reversing their reopening plans. Reopening efforts are on pause in 15 other states.
The reversals are keeping layoffs elevated and threatening to weaken hiring. More than 1.3 million people applied for unemployment benefits last week, the Labor Department said Thursday, down from 1.4 million the previous week but still roughly double the pre-pandemic weekly record. Applications had fallen steadily in April and May but have barely declined in the past month.
Jobless claims “are stalled out at a new normal of over a million new claims every week,” said Daniel Zhao, an economist at Glassdoor. “The virus is in the driver’s seat and we’re along for the ride until the current public health crisis is resolved.”
Some economists have even warned that a so-called “double-dip” recession, in which the economy shrinks again after rebounding, could develop. Consumers, the primary driver of U.S. economic growth, are pulling back on spending in restaurants and bars, especially in the hardesthit states. Some small businesses are closing, either under government orders or because of a lack of customers, according to private data.
Several companies have warned in recent days that more layoffs are coming. Levi’s, the iconic jeans maker, said it will cut 700 corporate jobs. United Airlines has warned 36,000 of its employees that they could lose their jobs in October. (Airlines aren’t allowed to cut jobs until then as a condition of accepting billions of dollars in government rescue aid.) Motorcycle maker Harley Davidson said it will eliminate 700 corporate jobs.
Walgreens will cut 4,000 jobs at its pharmacy chain Boots in the United Kingdom. Bed Bath & Beyond said it will close 200 stores over the next two years as its sales have slid.
The total number of people receiving jobless benefits fell 700,000 to 18 million. That suggests that some companies are continuing to rehire a limited number of workers. An additional 1 million people sought benefits last week under a separate program for self-employed and gig workers that has made them eligible for aid for the first time. These figures aren’t adjusted for seasonal variations, so the government doesn’t include them in the official count.
The renewed threat of job losses is arising just as a federal program that provides $600 a week in unemployment benefits, on top of whatever jobless aid each state provides, is to expire at the end of this month. Congressional leaders have said they will take up some form of a new rescue package when lawmakers return later this month from a recess.
Administration officials have expressed support for additional stimulus. But Senate Republicans have opposed extending the $600 a week in unemployment benefits, mainly on the ground that it discourages laid-off people from returning to work. House Democrats have pushed to extend the $600 a week through January.
In an interview Thursday on CNBC, Treasury Secretary Steven Mnuchin suggested that the administration might support an extension of supplemental unemployment aid but at a reduced level.
“We’re going to make sure people are (incentivized) to go back to jobs,” Mnuchin said.