High layoffs suggest slow economic rebound
WASHINGTON (AP) — Three months after the viral outbreak shut down businesses across the country, U.S. employers are still shedding jobs at a heavy rate, a trend that points to a slow and prolonged recovery from the recession.
The number of laid-off workers seeking unemployment benefits barely fell last week to 1.5 million, the government said. That was down from a peak of nearly 7 million in March, and it marked an 11th straight weekly drop. But the number is still more than twice the record high that existed before the pandemic. And the total number of people receiving jobless aid remains a lofty 20.5 million.
The figures surprised and disappointed analysts who had expected far fewer people to seek unemployment aid as states increasingly reopen their economies and businesses recall some laid-off people back to work. The data also raised concerns that some recent layoffs may reflect permanent losses as companies restructure their businesses, rather than temporary cuts in response to government-ordered closures.
The report is “telling us that the scars from the job losses in the recession will be longer-lasting than we expected,” said Gregory Daco, chief U.S. economist at Oxford Economics.
At the same time, Thursday’s figures may have raised as many questions about the state of the job market as they answered. Jobless claims generally tracks the pace of layoffs. But they provide little information about how much hiring is occurring that would offset those losses. In May, for example, employers added 2.5 million jobs — an increase that caught analysts off-guard because the number of applications for unemployment aid was still so high.
Some likely factors help explain why applications for jobless benefits remain so high even as businesses increasingly reopen and rehire some laid-off workers. For one thing, many businesses that deal face-to-face with customers — from restaurants and movie theaters to gyms and casinos — remain strictly limited to less-than-full capacity. Some of those establishments are still cutting jobs as a result.
Casinos in Louisiana, for example, can open at half-capacity. But Boyd Gaming Corp., which operates five casinos in the state, has informed 1,500 of its workers that with financial losses mounting, they could be laid off by early July.
And in some especially hard-hit sectors, like the hotel and travel industries, corporations are now slashing white-collar workers because their business remains far below pre-pandemic levels. This week, Hilton Hotels said it would cut 22% of its corporate global workforce — about 2,100 jobs.
Although consumer spending, the primary driver of the U.S. economy, is recovering from its low in mid-April, it remains far below its pre-pandemic level, according to data compiled by Opportunity Insights. That trend may be forcing changes at some companies that managed to withstand the initial shutdowns.