Recent Wave Of Job Losses Casts Shadow On Recovery

Recent Wave Of Job Losses Casts Shadow On Recovery

Tyler Durden

Tue, 09/01/2020 – 16:45

The second round of layoffs, something we warned readers in early August, is unfolding across corporate America’s global firms over the last couple of months as the labor market recovery in the U.S. stalls, dashing hopes the world’s largest economy can sustain a V-shaped recovery in the back half of the year.

MGM Resorts International and Coca-Cola Co were some of the latest examples of companies reducing their workforce. Goldman Sachs recently estimated that 25% of the workers temporarily laid off earlier this year wouldn’t be able to find jobs, casting a shadow over President Trump’s narrative of a robust recovery. 

“Global corporations have announced more than 200,000 job cuts or buyouts in recent weeks, a worrying sign that more losses will come as furloughs implemented early in the pandemic turn into permanent layoffs,” Bloomberg said.

Here are some of the largest job-cuts and or buyouts announced in the last 30 days: 

Bloomberg calculates, since July 24, airline executives had cut, furloughed, or told at least 400,000 employees their jobs were in jeopardy. Last week, airlines were still cutting jobs: 

  • American Airlines Group Inc. said it would cut 19,000 workers after federal payroll aid expires, rounding out a 30% workforce reduction since the coronavirus pandemic began.
  • United Airlines Holdings Inc. sees as many as 2,850 pilot furloughs this year without approval for additional government support.

The outlook of the airline industry reflects a recovery that resembles an “L,” and recovery back to 2019 levels that could take years. Airline corporate executives are realizing they don’t need as many workers as they once thought, due to the continuing collapse in travel and tourism. 

The consumer goods and retail space could be much worse off than airlines – at least one million workers have been furloughed since early April. Many of these jobs are becoming permanent layoffs, with the trend getting worse in the back half of the year. Here are some of the latest furloughs or job reductions in the industry:

  • Ulta Beauty Inc. said this week it brought back 17,000 of the 33,000 employees furloughed in April. Not all of the remaining workers will be able to return this year.
  • Walgreens Boots Alliance Inc. said in July it planned to cut roughly 4,000 jobs in the U.K.
  • Coca Cola Co. offered early departures to 4,000 workers in North America, with more planned around the globe.
  • Estee Lauder plans to shed 1,500 to 2,000 jobs worldwide, or about 3% of the workforce. 
  • J.C. Penney Co. is cutting its workforce during its bankruptcy proceedings, with plans to close stores and reduce its workforce by about 1,000 corporate, field management, and international positions.
  • Bed Bath & Beyond Inc. will eliminate 2,800 jobs.
  • L Brands Inc., which owns Victoria’s Secret, is preparing to cut 15% of corporate jobs, or roughly 850 positions.
  • Levi Strauss plans to eliminate 700 jobs.

The second round of layoffs is happening as the recovery stalled in late June/July, and a fiscal cliff could result in a plunge in consumption into the end of summer unless more stimulus checks are dished out by the government. Another industry plagued with recent buyouts and job cuts has been the industrial space: 

  • Boeing Co. is preparing to offer buyouts to employees for a second time this year, extending workforce cuts beyond the original 10% target unveiled in April.
  • Raytheon slashed 8,000 jobs in its commercial aviation businesses at the end of July.
  • Airbus S.E.’s CEO said early in July that a plan for 15,000 job cuts was not the worst-case scenario, and if the second wave of coronavirus were to emerge, the jet maker would need to adapt again.

The second round of layoffs is more bad news as it will only protract the recovery phase as job loss reduces consumption in an economy that is 70% consumer-based. In every recession, consumers reduce spending on entertainment. 

Las Vegas was closed in March, with tens of thousands of folks furloughed. The Vegas strip reopened in June, but with limited travel to the town, many furloughed employees are now being laid off. MGM Resorts announced Friday that it would fire 18,000 employees. None of which is surprising, considering we noted in July that a recovery for the gambling capital of the U.S. could take three years. Bloomberg notes other job cuts in the entertainment industry:  

  • NBCUniversal, a unit of Comcast Corp., is eliminating jobs across its broadcast and cable-television businesses, movie studios, and theme parks. The cuts may amount to 10% of its 35,000-person payroll, and the Wall Street Journal reported this month.
  • AT&T Inc., whose WarnerMedia unit includes the Warner Bros. studio and cable channels such as HBO, CNN and TBS, has been making its own reductions.

What’s worse is the continuing downturn in small businesses. About 22% of workers from small firms furloughed between March and June had been laid off in July, while 28% were still furloughed, a study by payroll and benefits firm Gusto said. 

A recent rise in Americans applying for unemployment could be the result of the second round of layoffs. In August, 32 million people were receiving either state or federal unemployment benefits, with about a quarter of all American personal income derived from the government. 

This all suggests permanent job losses are increasing and will result in deep economic scarring. 

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Author: Tyler Durden