‘Scarring’ of U.S. economy dims future for hiring

The number of new state unemployment claims dipped last week, but job losses continue to batter the economy as rising coronavirus cases pushed some regions of the country to reverse course and reimpose shutdown orders on businesses.

More than 1.3 million workers, seasonally adjusted, filed new claims for regular unemployment benefits last week, the government reported Thursday. Another million firsttime claims were filed under the federal Pandemic Unemployment Assistance program.

Taken together, the report paints a disappointing picture of recovery: Total new unemployment claims have edged up from their mid-june lows.

Although hiring nationwide has picked up in recent weeks, most of the payroll gains were temporarily laid-off workers who were rehired. The pool of employees whose previous jobs have disappeared and who must search for new ones has grown.

“Their circumstances may be more challenging to rectify than those who were laid off because of a temporary closure,” said Elizabeth Akers, who was a staff economist with the Council of Economic Advisers under President George W. Bush. “Finding new jobs will be more difficult. There’s been scarring in the economy.”

Recent readings from employment sites also point to more lasting damage to the labor market. Overall job openings at Ziprecruiter rose last week, for instance, but the number of new jobs posted declined for the fourth week in a row.

“For now, at least, that suggests the increase in vacancies is being driven by a slowdown in hiring, not an increase in labor demand,” said Julia Pollak, Ziprecruiter’s labor economist.

“Recent jobs reports are encouraging, but the increase in employment entirely reflects rehires of workers on temporary layoff,” she added. “The recovery in new hiring has yet to begin.”

The longer the pandemic dampens or halts shopping, dining out, travel and business operations, the more likely it is that jobs put on a brief hold simply vanish.

Brooks Brothers, the nation’s oldest apparel brand in continuous operation, filed for bankruptcy this week and permanently closed 51 stores.

And airlines announced that they might lay off or furlough tens of thousands of employees in October despite billions of dollars in government aid because air travel has not rebounded.

In Texas, where a jump in coronavirus cases has led to a new round of business closings and other restrictions, unemployment claims have risen.

More than 117,000 people filed for benefits in Texas last week, a jump of more than 20,000 from a week earlier. It was the second straight weekly increase and the most new filings since late May, although still below the peak in early April.

A wide range of indicators recently have suggested that the economic rebound is losing momentum in states where virus cases are rising quickly.

The unemployment data released Thursday didn’t paint a clear picture, however. New filings fell in Oklahoma, Florida and other virus hot spots, and rose only slightly in Arizona. Claims rose in New Jersey and New York, states where the virus is comparatively under control. And economists caution against reading too much into week-to-week changes in state filings, which can be volatile.

Congress created the emergency Pandemic Unemployment Assistance program in March to extend benefits to independent contractors, self-employed workers and others who don’t qualify for regular state unemployment insurance. The effort got off to a slow start: Many states struggled to roll out the program while dealing with a record number of regular unemployment claims. Jobless workers across the country reported encountering jammed websites, lost paperwork and confusing or contradictory instructions.

Those issues have spilled into the data itself. Backlogs, data-entry errors and other issues have made it hard to know how many people are receiving benefits under the program, or exactly when their claims were first filed. At least some states appear to be counting the same recipients multiple times.

But economists say there is little doubt that the program is helping millions of workers who would ordinarily fall through the cracks of the unemployment safety net. More than 10 million people have filed claims under the emergency pandemic program, which is set to expire at the end of the year.

A weekly $600 federal supplement for all jobless workers is scheduled to end this month. The Paycheck Protection Program, an effort designed to preserve jobs by offering forgivable loans to small business, was recently extended through October.

Liz Etheredge, the chief executive of Mecklenburg Paint in Charlotte, North Carolina, said the federal loan made it possible for her to keep workers employed.

The spring paint season was just starting when the pandemic hit.

“Oh, gosh, things just pretty much stopped,” said Etheredge, whose company also handles property management.

Initially she helped most of her 30 employees apply for unemployment benefits, which she said was time consuming and confusing.

“One day I waited on hold for three hours to reach somebody” with the state to work out glitches with benefit applications, she said, “and then another day I waited two hours.”

She applied for a Paycheck Protection Program loan, hoping to avoid permanently laying off painters.

“It came just in time,” said Etheredge, who was able to avoid using up her savings.

She has put everyone back on the payroll through the use of her loan money, so she expects that the entire amount will be forgiven.

“I just worry how this country is going to pay it all back,” she said.

Thomas Falls Jr. used the federal loan program to help pay workers at his family’s commercial cleaning company, Falls Facility Services in Birmingham, Alabama.

About a quarter of his business, which spans much of the state, dried up when the pandemic started, Falls said. He was forced to lay off about 25 workers south of Montgomery when the schools they cleaned closed. A new contract at a county government building elsewhere in the state and demand for enhanced sanitizing at other offices, though, made it possible to keep the rest of his 200 employees on the payroll, and even hire a few more.

“We were kind of fortunate,” said Falls, who said he planned to rehire the rest of his employees once schools reopened.

Lisa D. Cook, a professor of economics and international relations at Michigan State University, worries what will happen when these assistance programs dry up.

“At the heart of this is job loss,” said Cook, who testified before a congressional committee this week. State and local governments are laying off health care and education workers, and eviction bans are expiring even though a significant chunk of household renters and businesses are having trouble making payments.

“I just worry about this all piling up in the system,” she said.