New wave of layoffs in U.S. feared as coronavirus pain intensifies

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div> WASHINGTON (Reuters) – Job cuts by state and local governments whose budgets have been squeezed to fight the COVID-19 pandemic and more second-wave layoffs in the private sector have likely contributed to the last week to a 10th consecutive week of more than 2 million Americans seeking unemployment benefits.

FILE PHOTO: An “We are hiring” sign displays advertising jobs at the entrance to a restaurant, while Miami-Dade County is loosening some of the lockouts put in place during the coronavirus epidemic (COVID- 19), in Miami, Florida, United States, May 18, 2020. REUTERS / Marco Bello

The Labor Department’s weekly jobless claims report, the most recent data on the health of the economy, should also show on Thursday that the number of people receiving unemployment benefits hit a new record in mid- may.

The report is being monitored to assess how quickly the economy is rebounding after businesses closed in mid-March to control the spread of COVID-19 and almost shut the country down. As non-core businesses begin to reopen, claims have remained at surprisingly high levels.

“I am concerned that we are witnessing a second round of layoffs in the private sector which, combined with an increasing number of cuts in the public sector, is increasing the number of unemployed,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. .

“If that’s the case, given the pace of reopening, we could be in a prolonged period of extremely high unemployment. And that means the recovery will be slower and take much longer. “

The number of people filing new claims for state unemployment benefits was likely 2.1 million seasonally adjusted for the week ended May 23, up from 2.438 million the previous week, according to Reuters survey of economists .

The number has declined steadily since reaching a record 6.867 million in late March, but has not registered less than 2 million since mid-March. State governors have asked for $ 500 billion to help cover public health spending and lost tax revenue, highlighting the devastating impact of COVID-19 on the economy.

The Commerce Department is expected to confirm in another report on Thursday that gross domestic product contracted at an annualized rate of 4.8% in the first quarter, the deepest drop in production since the great recession of 2007-2009.

The second wave of layoffs could worsen with Boeing (TO PROHIBIT) announcing Wednesday that it is cutting more than 12,000 jobs in the United States and also revealing that it plans “several thousand layoffs remaining” in the coming months.

Just as bleak on Wednesday was the Federal Reserve’s Beige Book, which contains anecdotal information on business activity from nationwide contacts on or before May 18. His portrayal of the labor market indicates that “employment has continued to decline in all districts” and “has continued to fall sharply in the retail and leisure and hospitality sectors”.

In addition to spilling over into segments of the economy that were not initially affected by the closure of non-core businesses, some economists have said that initial demands also remain high due to backlogs of applications that have overwhelmed state unemployment offices.

But this was rejected by many who argued that these arrears should have been eliminated now.

CLAIMS ARE NOT DECLARED?

The state employment offices are also believed to combine federal government pandemic assistance program (PUA) claims with regular unemployment claims instead of separating them as required by the Department of job.

The PUA program is aimed at concert workers and many others who are not eligible for regular unemployment insurance. However, they must first apply for state benefits and be refused in order to obtain federal assistance for job and income losses related to the coronavirus.

Statements last week bring the number of people who have applied for unemployment benefits to more than 40 million since March 21. Economists have warned that the figure does not represent the number of jobs lost due to the pandemic, citing technical and procedural difficulties in state unemployment offices.

The focus should be on the number of people who are still receiving unemployment benefits. These so-called continuing claims could shed light on the effectiveness of the government’s paycheck protection program.

The PPP, which was part of a historic budget package worth almost $ 3 trillion, offered loans to businesses that could be partially canceled if used for employee wages.

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According to the Reuters poll, continuing claims, which are reported one week late, likely hit a record 25.750 million in the week ending May 16, up from 25.073 million the previous week. These data will cover the period during which the government asked households about the unemployment rate in May.

Based on these forecasts, the number of pending claims increased by approximately 7.7 million between the April and May survey periods, suggesting an increase in the unemployment rate from the record high of 14 , 7% recorded last month after the Second World War.

“Now is a good time to think how many of these people who have lost their jobs will recover them, my feeling is that 25% will not do so and that is what gives us a double-digit unemployment rate until 2021 Said Joe Brusuelas, chief economist at RSM in New York. “Bankruptcies in small and medium-sized businesses will result in a much higher rate of permanent layoffs.”

Report by Lucia Mutikani; Editing by Chizu Nomiyama

Our standards:Principles of the Thomson Reuters Trust.

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