Layoffs Start Turning From Temporary to Permanent Across America

[exstasie]

Came across a couple pessimistic articles today about the US economic outlook.

The White House keeps talking about a "tremendous rebound" coming in Q3, and everyone keeps saying the unemployment numbers are only temporary. However, the mounting permanent layoffs and looming bankruptcies are starting to challenge that picture:

Layoffs Start Turning From Temporary to Permanent Across America

What’s happening to Michigan Maple points to a worrying trend emerging from the stacks of layoff notices filed by businesses in California, Florida, and New York, where service industries have been hammered by lockdown orders, as well as politically important swing states such as Michigan and Ohio, where key industries such as steel and autos already faced headwinds going into 2020. Plenty of layoffs that just a month ago were labeled “temporary” are now tagged “indefinite” or “permanent.” Alongside announcements of sweeping staff cuts by major employers such as Boeing Co. and U.S. Steel Corp. and the accelerating pace of downsizing in brick-and-mortar retailing, such notices are a sign that even as businesses continue to hope for a speedy recovery, they are starting to plan for a slow one.

The new permanent layoffs are hitting a wide swath of the economy both geographically and sectorally. Uber Technologies Inc. on Wednesday became the latest major company to announced long-term layoffs, saying it would be eliminating 3,700 jobs, or 14% of its staff worldwide. A day earlier, Airbnb Inc. said it was cutting 25% of its workforce, or about 1,900 people worldwide.

You can see it in Ferndale, Wash., where aluminum giant Alcoa Corp. recently notified state officials that it will be laying off 700 workers by the end of July as it shuts down a smelter that has been a fixture in the community since 1966, part of a plan to “curtail” almost 50% of its global smelting capacity.

In Beallsville, Ohio, American Energy Corp., a subsidiary of Murray Energy, a coal miner already in bankruptcy proceedings before the crisis hit, is laying off 110 workers at its Century Mine, according to an April 27 letter to state officials in which the company cited sudden contract cancellations by major customers. “This layoff will be indefinite and may be permanent,” David Cutlip, the mine’s general superintendent, wrote.

In such industries as aviation, companies large and small are resorting to permanent layoffs. On April 29, Boeing announced it will cut about 16,000 employees, approximately 10% of its workforce, this year.

https://www.bloomberg.com/news/articles/2020-05-06/temporary-coronavirus-layoffs-are-turning-permanent-around-u-s

These coronavirus job losses will be permanent

The wave of job losses that has come crashing down in the past six weeks has had one silver lining: Many economists and investors think that a good portion of the layoffs are temporary, and people will be able to head back to work once government lockdowns start to ease.

That may be true in some sectors. But for the airline industry, which has been battered by plunging demand as people hunker down at home, changes to its workforce will be more permanent.

General Electric (GE) said Monday that it is cutting as many as 13,000 jobs in its jet engine business for good. The move is designed to cope with an "unprecedented" and "deep contraction" of commercial aviation, according to the company.

Meanwhile, a top executive at United Airlines (UAL) is urging employees to consider leaving the company voluntarily.

J.Crew is the first major US retailer to file for bankruptcy amid the coronavirus pandemic, but it's unlikely to be the last.

On the radar: Attention is now on J.C. Penney and Neiman Marcus, which have reportedly come close to filing for bankruptcy in recent weeks.

Some retailers can't afford to file until stores reopen because they need money from liquidation sales, my CNN Business colleague Chris Isidore reports. The "everything must go" blowouts help get products off shelves and fund operations through bankruptcy proceedings.

"We probably would have seen more file by now if stores were open," Reshmi Basu, an expert in retail bankruptcies at Debtwire, told Chris. "We're clearly seeing a lot of companies engage [bankruptcy] advisors. But it's not a great time."

Investor insight: Looming bankruptcies aren't limited to the retail. Bloomberg reports that Hertz, which was scrambling Monday to get lenders to extend a grace period on missed debt payments, could file for bankruptcy as soon as Tuesday. Shares of the rental car company are down 29% in premarket trading.

https://www.cnn.com/2020/05/05/investing/premarket-stocks-trading/index.html

Is it time to stop pushing this "everything will blow over by summer" narrative yet?

Trump's tone has changed quite a bit. Now the message is "more people are definitely going to die, but the economy is more important." That tells me the underlying economic situation is pretty dire.

I don't believe reopening is going to bring a miraculous economic recovery. Surveys show a strong majority are in favor of the shutdowns and are more concerned about the epidemic than the economy. That (combined with high unemployment) probably means we can expect very weak consumer spending going forward. The Trump administration is in for a rude awakening when that becomes more obvious.

[jackg]

If the US has some sort of redundancy pay (severence package is it called?) then this will compound the problem too and cause companies losing employees that have been there for years to see an inability to take on workers until they're back in profit unless they take out loans...

The debt bubble becomes a problem when the economy starts to grind to a hault and then something else will have to happen that we haven't seen yet (afaik). I think it's looking more and more likely that governments across the world will have to look into socialising large areas of the economy until they become profitible and can be sold (the banks were managed in a similar way but these SHOULD bounc eback better than the banks since the liability is spread quite a bit more it can't be put down to a banker and an insurance salesperson in some office somewhere and people have more confidence than 2006-2008 at the moment).

[davis196]

If the US has some sort of redundancy pay (severence package is it called?) then this will compound the problem too and cause companies losing employees that have been there for years to see an inability to take on workers until they're back in profit unless they take out loans...

The debt bubble becomes a problem when the economy starts to grind to a hault and then something else will have to happen that we haven't seen yet (afaik). I think it's looking more and more likely that governments across the world will have to look into socialising large areas of the economy until they become profitible and can be sold (the banks were managed in a similar way but these SHOULD bounc eback better than the banks since the liability is spread quite a bit more it can't be put down to a banker and an insurance salesperson in some office somewhere and people have more confidence than 2006-2008 at the moment).

Yeah,the US economy is build over leverage(big amounts of debt) and when the company revenues go down,all that debt can't be paid,so the banks will start having issues with their revenue,so the situation gets even worse.The possible solutions are two.The first one is the nationalization of banks and corporations by the governments so they could be saved.It will cost trillions and efficiency of this method is questionable.
The second solution is shaving all debts.The banks will survive without government support,but many people will lose a big portion of their savings.I can't say which solution is better.They are both bad.

[abhiseshakana]

Around 200 countries in the world are affected by corona and are trying to overcome the corona pandemic without knowing exactly when the outbreak ends. Developed countries that we consider rich and great countries also affected and they are trained to handle it because the spread of Corona is so fast and has a huge impact on the social sector, the economy, to the financial sector. Moreover, until now the disease outbreak vaccine has not been circulated.

The economic downturn of the two countries with the world's largest economy will have a significant impact on the world economy, the United States has just released data on gross domestic growth in the first quarter of 2020 minus 4.8% compared to the same period last year. While China previously recorded the economy in the first three months of this year minus 6.8%. the global panic escalation was very high due to the corona pandemic, causing irrational reactions in the financial sector as well as capital outflows from emerging market countries.

All this pessimism arises from the lack of clarity regarding the end of the pandemic. In thinking as a layman why all countries are not compact to stop completely for 2 weeks or 1 month to really stop the spread of corona. Of course, the loss will be smaller than the economic damage that occurs if the corona drags on.

In a pandemic like this, the hardest-hit countries are foreign debt, countries that depend on imports and countries that rely on dollars.

[coin-investor]

Is it time to stop pushing this "everything will blow over by summer" narrative yet?

Trump's tone has changed quite a bit. Now the message is "more people are definitely going to die, but the economy is more important." That tells me the underlying economic situation is pretty dire.

I don't believe reopening is going to bring a miraculous economic recovery. Surveys show a strong majority are in favor of the shutdowns and are more concerned about the epidemic than the economy. That (combined with high unemployment) probably means we can expect very weak consumer spending going forward. The Trump administration is in for a rude awakening when that becomes more obvious.

If they have done that before the start of March they are already back in business, they should have taken the lesson of Italy and other countries, Trump is very arrogant and do not have the foresight to things like, has was warned about the lax and reopening, now so many people in the US are suffering, you cannot beat pandemic your own way.

[Wenbing]

This pandemic has made me to believe two things:
1. Everything is subject to change
2. There is no utopian business system anywhere.

We see how a virus killed people and destroyed millions of jobs globally.

Well, things have changed significantly. Many businesses will maintain a lean startup and remote working.

All business will consider laying off workers that are not essential for now.

Sure...we shall recover but its not anytime soon.

[The Sceptical Chymist]

Is it time to stop pushing this "everything will blow over by summer" narrative yet?

I'm not sure what exactly is expected to blow over by summer, but my guess is that the COVID-19 situation will have at least improved by then--but those layoffs and all the economic damage that's been done certainly won't be repaired so quickly.

I don't believe reopening is going to bring a miraculous economic recovery.

My suggestion would be to lower your expectations a few notches.  Reopening businesses won't be a panacea for the economy, but it will help. 

J.Crew is the first major US retailer to file for bankruptcy amid the coronavirus pandemic, but it's unlikely to be the last.

On the radar: Attention is now on J.C. Penney and Neiman Marcus, which have reportedly come close to filing for bankruptcy in recent weeks.

J.C. Penny has been on death's door for a long time now, so that isn't surprising.  I wasn't aware about the J. Crew situation, but the first thought that pops into my head is that they probably didn't have a strong web-sales business going for them.  And I don't know much about Neiman Marcus, but brick-and-mortar retailers have been suffering for years and I expect quite a few of them to be gone in a few years--coronavirus or not. 

Things are pretty bad right now, but we haven't reached doomsday yet.  If businesses start reopening, there will be a large number of people returning to work, even if some businesses are cutting back on their work forces.  It's going to take some time, but things are going to get better.

[Hydrogen]

Trump's handling of the US economy resembles a movie scene where a character is mortally wounded and bleeding out. Their companions say: "don't worry, everything will be ok! Think positive, think positive"! Deep down, I think everyone knows circumstances may not end well. They vaguely resemble a no win scenario. People naturally want to mentally will events to have a positive outcome. And so we have Trump trying to spiritually manifest a positive outcome to what appears to be a disaster in progress.

Many are fond of saying we've never encountered an economic disaster like this, before. On the other hand we've never had so many tools: science, technology and resources available to address a disaster like this either. Economic depression isn't our only option. Perhaps an inverse opposite will occur, where we'll witness a sharp increase in innovation and startups which develop around addressing the pandemic in adjusting to whatever lifestyle best suits it.

[so98nn]

Is it time to stop pushing this "everything will blow over by summer" narrative yet?

I'm not sure what exactly is expected to blow over by summer, but my guess is that the COVID-19 situation will have at least improved by then--but those layoffs and all the economic damage that's been done certainly won't be repaired so quickly.

This is a guess, we can't rely on a guess mate. Also, COVID-19 is seemingly a virus with similar biological activity that has resemblance with HIV virus. It could happen that we will never see a vaccine for it and the treatment might include extra care, pumping immunity and in severe cases ICU's.

My point is, how they will overcome the situation like that one?

Will we have business re-opened? Would that be any good, because since it will gather huge crowd of asymptomatic people with the healthy one and worsen the case. Its been ages and we still dont have HIV vaccine, imagine that case with COVID-19 which mostly results into death.

Yes, USA has fallen but they can't just express it publicly. To be honest the more death occurs in their country the more labour they are loosing in turn.

You can't build nation stronger with no one in it. Similarly you can't grow your economy! Thats just too sarcastic when Trump assures it in positive way.

[exstasie]

I don't believe reopening is going to bring a miraculous economic recovery.

My suggestion would be to lower your expectations a few notches.  Reopening businesses won't be a panacea for the economy, but it will help.

My expectations have obviously been lowered. It's other people who still seem incredibly optimistic. "We're going to reopen the economy and everything is going to get better!" Even you are saying it yourself ("It's going to take some time, but things are going to get better.")

The point is, it's not really an issue of time. It's a question of whether the global economy can dig itself out of a deflationary cycle.

The Trump administration keeps promising a "tremendous rebound" in the second half of the year and people seem to be eating it up despite how unlikely it looks. None of the middle class work-from-home people I know is concerned at all. This is just a vacation for them. The stock market refuses to even pull back despite unprecedentedly bad economic data. So much optimism, it just screams of a dead cat bounce.

Things are pretty bad right now, but we haven't reached doomsday yet.

Of course it's not doomsday. If doomsday is coming, then this is the beginning. In 2008 terms, the Bear Stearns collapse hasn't happened yet.

[avikz]

Is it time to stop pushing this "everything will blow over by summer" narrative yet?

Trump's tone has changed quite a bit. Now the message is "more people are definitely going to die, but the economy is more important." That tells me the underlying economic situation is pretty dire.

I don't believe reopening is going to bring a miraculous economic recovery. Surveys show a strong majority are in favor of the shutdowns and are more concerned about the epidemic than the economy. That (combined with high unemployment) probably means we can expect very weak consumer spending going forward. The Trump administration is in for a rude awakening when that becomes more obvious.

Surveys will definitely show that people are in favor of lockdown in US. Because, unlike any other countries, US citizens are getting a monthly help of $1200 every month. So, their basic needs a definitely being taken care by the government. So they are not feeling that pinch to survive. Even though US government is printing money to cover that expense, still the citizens are in good shape financially. Now that the basic needs are taken care, economy is the area of priority for Trump.

Reopening may not solve the issue overnight, but that's the best bet that Trump has in his kitty. Unless and until people spend their money, the economy is not going to take a U-turn. Majority of the countries are facing similar issues and re-opening may solve this unemployment issue to some extent. Full-fledged impact can only be seen once the situation normalizes but it is very unlikely for another 2-3 months. 

[dothebeats]

If it's already that worse in America, imagine the developing countries struggling for economic stability and at the same time fighting the pandemic with very little resources to work with.

Here in the Philippines, the government already said that they are expecting the worst when the hard lock-down is lifted on the 15th. They are sure--among with the scientists and chaos theorists--that many will die, but the country cannot afford another month or so of hard lock-down else the people will die of hunger. How will this pan out until a vaccine is created, we don't know. But it's going to be pretty messy for sure.

Trump changing his narratives from a proud leader capable of bringing up virus-proof ideas on the table to a concerned and somewhat unsure man speaks volumes about how dire this situation really is for the US. I'm sure he had read the numbers, and it kept on rising at an alarming rate albeit the administration trying to prevent the closure of many businesses by giving aid and cash. He was always this cocky guy that speaks before he thinks, but that has changed now--and perhaps that's for the better (at least during this time.)

I don't think the reopening of the economies would be the answer to the growing woes this pandemic has caused. Global economy was taking a small beating prior to the spread of COVID-19, and it was largely accelerated by this current pandemic. Rebounds on Q2 of 2020 will not happen, and I'm sure that people can also see that easily. Right now, what Trump is doing is conditioning the mind of the people that 'all will be well' without providing a timeline or laying down a solid game-plan to at least mitigate the damage of this trying time.

Needless to say, Trump's administration overestimated their capabilities to combat the problems this pandemic brought forth. Summertime would not be good for the Americans, for damn sure, with that growing unemployment rate as businesses close and people running out of money.

[stompix]

Reopening businesses won't be a panacea for the economy, but it will help. 

One thing that we know for sure is that opening will help and that keeping it shut down is not the solution.
From the start, all of us knew it, sooner or later no matter how many deaths are still happening every day you will have to re-open and let the people care for themselves to not get infected.
Some won't be able to, some will get sick, it's tragic, it's unfortunate and nobody wants this but it's the grim reality, at one point you won't be able to keep people in their homes unless you transform them in tombs.

Things are pretty bad right now, but we haven't reached doomsday yet.  If businesses start reopening, there will be a large number of people returning to work, even if some businesses are cutting back on their work forces.  It's going to take some time, but things are going to get better.

I'm really curious how long it will take.
Never in modern history have we experienced this, we have no model, you can't compare this to 1918, it might take only a few months in a hyper optimistic scenario or years. I think that it's probably the first economic crisis when the attitude of the people will have this huge impact, will the majority change their spending habits? For how long? These are questions that nobody knows and I doubt anyone can predict them accurately.

If it's already that worse in America, imagine the developing countries struggling for economic stability and at the same time fighting the pandemic with very little resources to work with.

And the problem is that developing countries are dependent on how things evolve in the developed countries.
The Europeans are waiting for the economy to restart so they have money to spend, developed countries are waiting for Europeans and Americans to have money so they can start producing stuff again. And some will be waiting for tourists....and that will be a long wait...

You can't build nation stronger with no one in it. Similarly you can't grow your economy!

You can't build anything with everybody staying at home and not working either.
Sooner or later you will have to choose, just as nobody likes going to war but at some point, you know that it's not your choice anymore.

[Lizzylove1]

I certainly would have preferred companies come up with pay cuts than laying off large numbers of staff. These ones will have to rely on government monthly package for a developed and rich nations while developing and underdeveloped poor nations whom are affected will just be dehumanized when they can't figure out what to do sustain livelihood. I hope people don't start taking to suicide.

[Juggy777]

Is it time to stop pushing this "everything will blow over by summer" narrative yet?

Trump's tone has changed quite a bit. Now the message is "more people are definitely going to die, but the economy is more important." That tells me the underlying economic situation is pretty dire.

I don't believe reopening is going to bring a miraculous economic recovery. Surveys show a strong majority are in favor of the shutdowns and are more concerned about the epidemic than the economy. That (combined with high unemployment) probably means we can expect very weak consumer spending going forward. The Trump administration is in for a rude awakening when that becomes more obvious.

Surveys will definitely show that people are in favor of lockdown in US. Because, unlike any other countries, US citizens are getting a monthly help of $1200 every month. So, their basic needs a definitely being taken care by the government. So they are not feeling that pinch to survive. Even though US government is printing money to cover that expense, still the citizens are in good shape financially. Now that the basic needs are taken care, economy is the area of priority for Trump.

Reopening may not solve the issue overnight, but that's the best bet that Trump has in his kitty. Unless and until people spend their money, the economy is not going to take a U-turn. Majority of the countries are facing similar issues and re-opening may solve this unemployment issue to some extent. Full-fledged impact can only be seen once the situation normalizes but it is very unlikely for another 2-3 months.  

@avikz you’re absolutely correct as US citizens are indeed getting paid to sit at home, but how can we blame them for choosing to protect their own lives over protecting their country’s economy?, because under similar situations we too would have chosen to protect our own lives rather than work and save our country’s economy.

In my personal opinion Trump should partially open up work places across US as that’ll help money circulate across the country which in turn will boost the economy, and then slowly when things begin to improve then he can completely restart each and every workplace in US.

While many people may not understand the importance of saving US economy right now, but these same people will question him later as to why he didn’t save the economy sooner because covid effect will pass, but a broken economy will take years to fix and it’s effect will be much worse hence I support his call to save US economy. However I don’t want to see anyone die in order to save US economy, and that’s where I’m hoping that he can make a plan where he can save life’s and US economy too.

Sources:

https://www.marketwatch.com/story/will-you-receive-a-direct-payment-from-2-trillion-bill-passed-by-senate-wednesday-depends-on-how-much-you-earn-2020-03-26

https://ohsonline.com/articles/2020/05/05/which-states-are-opening-and-which-are-not-this-week.aspx

https://foreignpolicy.com/2020/04/09/unemployment-coronavirus-pandemic-normal-economy-is-never-coming-back/

https://www.theguardian.com/commentisfree/2020/may/03/donald-trump-reopen-us-economy-lethal-robert-reich

[DoublerHunter]

^ Well I am not live in America but let me share my opinion, if temporary layoffs will turn into permanent then it will be a disaster to the whole country. I rather have to work with a smaller income than none at all it will not be the resolution for businesses it may only cause the bigger problem to the government for people who will die of starvation. If the government can support all the citizens who permanently lose their job which I know not but it will become another burden for them might as well they should find another way not to let permanent layoffs happen.

[el kaka22]

I am sure there will be a lot more hiring as well when this is over. Definitely companies are thinking about how they could make some more money, so they realized that there are tens of millions of unemployed people outside and if they fire the currently working people and not hire anyone for a year they could still hire anyone they want a year later and they will definitely still hire some good people because many of them are unemployed. That is why firing people are getting easier and easier, and I am sure the number will increase as well for a little bit more while.

Companies usually do not spend money on stuff as much as they spend on people, when you fire 10 people you are basically making a company go from minus to plus and that is very important to consider when people are fired and think why they were, it is just because of this.

[gentlemand]

I don't think there's any way of knowing what economies will look like at this stage. It might surprise us all with a rebound or it might be the beginning of the rout of the millennium.

A lot of elements have been barely staying afloat. You can keep a company in suspended animation but when you wake it up there's a good chance there won't be a market for it to service.

It's always been clear that there's a balance between populations dying vs the economy dying. The way it's been said out loud could do with a little working on.

[exstasie]

^ Well I am not live in America but let me share my opinion, if temporary layoffs will turn into permanent then it will be a disaster to the whole country. I rather have to work with a smaller income than none at all it will not be the resolution for businesses it may only cause the bigger problem to the government for people who will die of starvation.

There's actually a very curious phenomenon happening.

The big stimulus bill passed in March gifted $600/week in unemployment benefits to those laid off because of the pandemic, on top of their normal state unemployment benefits. So now there is a situation where a lot of people are making more money being unemployed than they do at their normal jobs. And now that businesses are reopening, those workers are refusing to come back to work. https://www.foxbusiness.com/money/coronavirus-businesses-struggle-lure-workers-away-unemployment-benefits

I don't think there's any way of knowing what economies will look like at this stage. It might surprise us all with a rebound or it might be the beginning of the rout of the millennium.

Yep, the stimulus sure has infused lots of cash into the markets. It has also created lots of perverse incentives that will hurt any recovery, and a whole lot of confusion in the markets.

I have no idea how it will all play out. My original model was the 1987 stock market crash, but that seems way too optimistic now. At the same time, it's hard to bet against something like $10 trillion printed by the Fed and Treasury.

[whyrqa]

to one way or another, the US economy will suffer very much from the fact that massive layoffs of people from work.  Recently, even large companies such as Boeing have been announcing a massive reduction in the number of their employees.  all these people will in any case apply for unemployment benefits.  I believe that the US government is faced with a very large problem that will exceed the performance of the well-known Great Recession.  there are no real plans to overcome unemployment and enable people to have real livelihoods.