US jobs picture darkens as large employers axe staff

A wave of coronavirus dismissals is breaking over corporate America as companies which just weeks ago had hoped that a short interruption to their operations would let them avoid job cuts prepare for a longer, more severe downturn.

Large companies have put hundreds of thousands of staff on unpaid leave this week, bowing to the reality of a prolonged shutdown and setting the scene for another historic high in jobless claims when official weekly figures come out on Thursday.

US unemployment claims leapt to 3.3m between March 15 and March 22, and Morgan Stanley analysts predict that the next report will show an even heavier toll of almost 4.5m.

But announcements by several large employers in recent days indicate that the cuts continued to gather pace after the period that report will cover and have begun to hit larger companies.

“We still saw week-on-week job growth in first two weeks of March; then there was a slight decline in the third week, but the fourth week was a really big drop,” said Irina Novoselsky, chief executive of CareerBuilder, a careers website which tracks job supply and demand.

In the retail sector alone, US-listed companies that together employ almost 700,000 people have in the past week said they were furloughing most or all of their store staff, as well as warehouse and some head office workers. Most are department stores or clothing chains, for which business has come to a standstill.

Gap, Kohl’s and Macy’s alone have put more than 227,000 workers on unpaid leave this week.

“Official lay-offs announcements were slow to trickle in over the first week or two” of the crisis, said Andrew Challenger, vice-president of the outplacement group Challenger, Gray & Christmas, “but we’ve really seen an enormous spike over the past few days”.

Line chart of Initial US unemployment claims, weekly (thousands) showing Future jobless figures are expected to eclipse even last week’s record

Employers’ initial optimism that consumer demand would “snap back” was ebbing by the day, he said. As executives see more data pointing to an extended recession, he added, many are converting furloughs, in which employees keep their medical benefits, into full-blown dismissals.

“There was a hope within the [retail] industry that they might be able to reopen stores within a couple of weeks, but it’s dawning on everyone that is not going to happen any time soon,” said Ken Perkins, president of the Retail Metrics consultancy.

“I don’t know what to even compare this to — maybe the Great Depression or maybe World War II,” he added.

Richard Hayne, co-founder of Urban Outfitters, said that it was the first time in the 24,000-person company’s 50-year history that it had furloughed employees.

The pain spreads far beyond retail, however. “The number one job category that is looking for work right now is bartenders,” Ms Novoselsky noted. Waiters, taxi drivers and cooks also suddenly find themselves out of work.

Gap, which has about 129,000 staff worldwide, said pay would be ‘paused’ for most store workers in the US and Canada while its stores remained closed © AP

Disclosures to individual states’ labour departments add detail to the headline figures. New York alone saw announcements of temporary dismissals this week from the likes of Peter Luger, the Brooklyn steakhouse, Le Bernardin, a favourite of Manhattan power lunchers, and The Carlyle, the luxury Madison Avenue hotel.

“It’s literally like nothing that we’ve seen before,” said Johnny Taylor, chief executive of the Society for Human Resource Management, whose members have had to deliver the harsh news to staff: “We are used to having answers and right now we just don’t have them.”

Surveys suggest that the toll is heaviest among smaller employers, half of whom told SHRM they could afford to pay their workers for no more than a month if their cities were quarantined.

The latest monthly report from ADP, the payroll processor, published on Wednesday, found that small businesses across the US had cut 90,000 jobs as of March 12 even as large ones hired 56,000 people. Transport, construction, support services and leisure were among the industries shedding jobs early, as the disruption from the pandemic began to escalate.

Hourly workers are among those most affected, according to the Service Employees International Union, which is seeing more companies cutting janitorial staff even as many states declare them essential workers.

Contract workers were among the first to be cut, with tens of thousands of airport workers dismissed soon after US airlines began grounding flights and seeking a government bailout.

“It’s outrageous that they demand billions of dollars and don’t think about workers that have loyally served them,” said Robert Hill, vice-president of an SEIU group representing 35,000 contracted airport workers along the east coast. Some 20,000 of its members had been axed or forced to work “severely” reduced hours by the third week of March.

As business mobilises to try to help fight Covid-19, there are some bright spots in the employment picture, with large retailers including Amazon and Walmart hiring tens of thousands of staff. Kroger said on Wednesday that it had hired about 32,700 workers in the past two weeks, including from hard hit sectors such as restaurants and hotels. The grocer’s like-for-like sales surged 30 per cent last month.

Some executives have been explicit in warning that more pain is to come for workers, however. Oscar Munoz and Scott Kirby, chief executive and president respectively of United Airlines, warned last week: “If the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today.”

Additional reporting by Patricia Nilsson in London and Claire Bushey in Chicago

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