The U.S. economy is being buffeted by a fresh round of corporate layoffs, signaling new anxiety about the course of the coronavirus pandemic and uncertainty about further legislative relief.
Companies including Disney, the insurance giant Allstate and two major airlines announced plans to fire or furlough more than 60,000 workers in recent days, and more cuts are expected without a new federal aid package to stimulate the economy.
With the election a month away, an agreement has proved elusive. Last-ditch negotiations between the White House and congressional Democrats were continuing Thursday, and Nancy Pelosi, the House speaker, did not rule out an agreement with Treasury Secretary Steven Mnuchin.
Democrats are pushing a $2.2 trillion proposal, while the White House has floated a $1.6 trillion plan.
After business shutdowns in the early spring threw 22 million people out of work, the economy rebounded in May and June with the help of stimulus money and rock-bottom interest rates. But the loss of momentum since then, coupled with fears of a second wave of coronavirus cases this fall, has left many experts uneasy about the months ahead.
“The layoffs are an additional headwind in an already weak labor market,” said Rubeela Farooqi, chief U.S. economist for High Frequency Economics. “As long as the virus isn’t contained, this is going to be an ongoing phenomenon.”
The concern has grown as measures that helped the economy weather the initial contraction have wound down. The expiration of a $600-a-week federal supplement to unemployment benefits was followed by a 2.7% drop in personal income in August, the Commerce Department said Thursday.
In a separate report, the Labor Department said 787,000 people filed new applications for state jobless benefits last week. The total, not adjusted for seasonal variations, was a slight decline from the previous week but continued to reflect the highest level of claims in decades.
The most recent layoffs are not included in that figure, nor will they be reflected in September data to be released by the department Friday, the last monthly reading on the labor market before the election. The report is expected to show a continuing slowdown in hiring, with barely half of the spring’s job losses recovered, although there is more uncertainty than usual around the estimates.
“This doesn’t bode well for the economy,” said Gregory Daco, chief U.S. economist at Oxford Economics. “When you combine the layoffs with fiscal aid drying up, it points to very soft momentum in the final quarter of the year.”
Furloughs of more than 30,000 workers by United Airlines and American Airlines began Thursday after Congress was unable to come up with fresh aid for the industry, though the companies said they would reverse the cuts if Congress and the Trump administration reached an agreement. A $50 billion bailout in March obligated the carriers to hold off on job cuts through Oct. 1.
Allstate announced Wednesday that it would lay off about 3,800 employees to reduce costs. Those are about 8% of the roughly 46,000 employees Allstate had at the end of 2019.
Houghton Mifflin Harcourt, one of the country’s largest book publishers, said Thursday that it was cutting 22% of its workforce, including 525 employees who were laid off and 166 who chose to retire. The company is a major supplier of educational books and materials, a business hit hard by school closings.
The Walt Disney Co. said Tuesday that it would eliminate 28,000 jobs, mostly at theme parks in Florida and California. Many of the workers had been on furlough since the spring, but the company said it was making the cuts permanent because of “the continued uncertainty regarding the duration of the pandemic.”
The economic picture is not completely bleak. Personal spending was up 1% last month, and readings of consumer confidence have been gaining. Helped by low mortgage rates, the housing market is on a tear in much of the country, lifting employment in residential construction 2.1% from June to August, according to the Associated General Contractors of America.
But for many Americans, the easing of economic growth has meant an unexpected return to the ranks of the unemployed.
Joann Taylor, a 45-year-old catering coordinator at a McAlister’s Deli franchise in Houston, used to work about 30 hours per week. But when the pandemic hit, her boss put her in an on-call position for deliveries only.
As a result, her hours were cut so severely — sometimes to two a week or none at all — that she qualified for unemployment insurance, including $300 a week in Texas benefits before taxes.
But when the $600 weekly supplement expired at the end of July, Taylor began struggling to pay her monthly bills, including $1,240 in rent, $180 for electricity, a $240 car payment and $155 for auto insurance.
Determined to provide for her daughters, who are 6 and 14, she used the time while underemployed to get a license to sell life and health insurance. Now she’s looking for an agency to take her on, hoping for steadier income.
Until then, without further aid from Congress, Taylor is worried about paying the rent and buying groceries.
“I will have to go to every church around me and ask for help,” she said. “I will stand in food lines with the kids because I cannot leave them at home. I will apply anywhere that I can for help because there’s no way that I can allow us to be homeless.”