Initial wave of layoffs ebbs even as new job cuts grow

San José, CA – On Thursday, May 28, the U.S. Department of Labor reported that there were 2.1 million new claims for state unemployment insurance in the previous week ending May 23. This was down from 2.4 million new claims the week before, showing that the wave of layoffs from the pandemic and efforts to control it is going down. At the same time this is still more than ten times the pre-recession level and brings the total number of new applications to 40 million in the last ten weeks.

The total number of people receiving benefits through both the regular state unemployment and the Federal Pandemic Unemployment Assistance or PUA program rose to 31 million for the week ending May 9. This number is almost three weeks old, and the total is bound to higher given the number of new claims and the fact that many states are just starting up their PUA payments.

While the new claims for unemployment insurance and the continuing claims provide the most up-to-date hard data on the economic crisis, they have always understated the actual number of unemployed. For example, at the peak level of people receiving benefits in June of 2010, just as the last recession was officially ending, only 44% of the unemployed were being paid benefits. In February of this year, right before the recession began, only 29% of the unemployed were getting insurance payments.

At the same time, more and more companies, large and small, are declaring bankruptcy or announcing mass layoffs. The biggest news in the last week was that the rental car giant Hertz had filed for bankruptcy. Discount retailer Tuesday Morning also filed for bankruptcy and said that it was closing a third of its stores permanently. Airplane maker Boeing announced 13,000 job cuts, and its suppliers are cutting even more jobs as Boeing cuts back production. One such company was General Electric, which is laying off thousands of workers. Many more workers are facing cuts in their wages or hours.

Another sign of a weakening economy is that the National Association of Realtors said that pending home sales fell 21.8% in April from March, and were off 33.8% from the year ago month. This slump in pending home sales means that a large drop in actual home sales will come this month or in June.

Amtrak also said that it was cutting 20% of its workers, or about 3600 people, in the next fiscal year that begins October 2020. This is just one of the many state, local and federal layoffs that are spreading as tax and sales revenues decline. Smaller cities and towns are facing a double whammy of being left out of the CARES Act – which only gave aid to cities with populations over 500,000 – and generally weaker medical facilities to fight the pandemic.

The recession is also speeding up the use of automation and artificial intelligence to reduce the number of workers that a company needs. Technology workers, who have not been hit as hard by the pandemic so far as most are able to work from home, are much more concerned about this than non-tech workers.

Hunger and homelessness are also on the rise. Millions of school children are going without free or subsidized lunches as schools close down. The government program set up even before the CARES Act has reached only 15% of the eligible children, leaving 25 million in danger of hunger. Courts in Texas and other states are ruling for landlords and banks that are evicting tenants and foreclosing on homes in the midst of a pandemic.

As people line up at food banks and/or being put out on the street, the struggle to expand food stamps, expand eviction bans, and to extend unemployment insurance benefits can only grow in the weeks ahead.

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