Continued layoffs alarm experts

Something deeper than lockdowns may be at play, economists worry.

Businesses are reopening after coronavirus shutdowns, governments are easing restrictions, and workers are gradually returning to their jobs. But the layoffs keep coming.

Economists said the current layoffs, though smaller than the wave in March and early April, were in some ways more worrying because they suggested that the crisis was reaching deeper into the economy even as lockdowns eased.

“What you’re seeing right now is economic scarring starting to happen,” said Martha Gimbel, an economist and a labor market expert at Schmidt Futures, a philanthropic initiative. “Layoffs that happened at the beginning of this likely were intended as temporary. But if you’re laying off people now, that’s probably a long-term business decision.”

Not all of the unemployment claims reported Thursday necessarily reflect new layoffs. Some states are working through backlogs of claims filed earlier in the crisis; in other cases, people filing under multiple programs may be double-counted.

But economists say there is little doubt that layoffs remain elevated three months into the crisis. And they warn that job losses could worsen if government support that has helped prop up the economy is allowed to lapse too soon.

Even for businesses that can reopen, the landscape looks very different from what it was a few months ago. Restaurants, hair salons, retail outlets and other in-person businesses are serving fewer people, either because of occupancy restrictions intended to protect patrons’ health or because customers remain cautious about crowded areas. And virtually all businesses are expecting reduced demand as a result of the weaker economy.

“A lot of businesses are at an extremely reduced capacity,” said Lindsey Piegza, chief economist at the investment bank Stifel. “A lot of them are operating under the assumption that they may be at this limited level of activity for some time. There’s the idea that all of these jobs are going to return, but that’s not necessarily true.”

NAM Y. HUH / ASSOCIATED PRESS A man passes signs of a store closed due to COVID-19 in Niles, Illinois, in May. Even for businesses that can reopen, the landscape looks very different from what it was a few months ago.