Layoffs and pay cuts are now striking more white collar jobs
CHRISTOPHER RUGABER
Updated 6 min read
WASHINGTON (AP) — First, it was bars, restaurants, hotels. And clothing stores, movie theaters, entertainment venues. And countless small businesses, from bookstores to barber shops.
Now, the record-setting flood of layoffs unleashed by the viral outbreak is extending beyond the services industries that bore the initial brunt and are still suffering most. White collar employees, ranging from software programmers and legal assistants to sales associates and some health care workers, are absorbing layoffs or salary cuts. So are workers in other occupations, like construction and real estate.
The mounting toll of job losses resulted last week in 5.2 million new applications for unemployment benefits, the Labor Department said Thursday. That raised the total number of laid-off workers in the month since the virus all but shut down the economy to 22 million — by far the worst run of U.S. job losses on record.
“There really is no industry that is immune from the effects of the outbreak,” said Daniel Zhao, senior economist at job listings website Glassdoor, said.
Employee discussions of layoffs on Glassdoor have jumped 47% among information technology firms and 64% in finance, Zhao said. Such discussions have nearly doubled among workers in health care. That’s no longer surprising: Many doctors’ offices and other health providers have cut back on nonessential procedures, and some are shedding jobs.
The software company Toast, which works with the restaurant industry, last week cut half its workforce — 1,300 people — citing a dizzying drop in restaurant sales. Yelp, the customer review site, cut 1,000 jobs. Groupon, the online discount company, shed 2,800.
Layoffs jumped by nearly 40,000 in Texas earlier this month, the government's report said, fueled partly by job losses in a category that includes data processing and online publishing companies. In Maine, job cuts swept through employers in the professional and scientific fields, which includes architectural and engineering companies. Healthcare workers and administrative support staff lost jobs in Tennessee.
Some law firms have felt compelled to shrink their staffs, too. One victim was Fern Weinbaum, who was furloughed last month from her job as a legal secretary at a small law firm in Manhattan. Weinbaum, 68, still hasn’t received her unemployment benefits, which she is counting on to help pay her monthly rent of $1,100.
“I am very anxious, I need the money,” she said. “It’s very frustrating.”
The grim figures on layoffs, furloughs and salary cuts point to a U.S. economy that is tumbling into what appears to be a calamitous recession, the worst in decades. The nation’s output could shrink by roughly 10.5% before it starts to rebound, according to Ryan Sweet, an economist at Moody’s Analytics. That would be more than double the contraction that occurred during the 2008-2009 recession, which was the worst downturn since the Great Depression of the 1930s.
All businesses deemed nonessential have been closed in nearly every state. Some economists say the unemployment rate could reach as high as 20% in April, which would be the highest rate since the Depression. By comparison, unemployment never topped 10% during the Great Recession.
The coronavirus is also hammering economies around the world. The International Monetary Fund said this week that the global economy will likely shrink 3% this year, the worst downturn since the 1930s. The IMF forecasts that the European economies that use the euro currency will shrink 7.5%, while Japan's contracts 5.2%. The global lending agency, which has seen 102 of its 189 member nations ask it for assistance, does forecast a solid rebound next year. But it said the outlook is unusually uncertain.
A quarter of British companies said they had shut or suspended business, according to a survey done in the week through April 5. Those that have remained open have furloughed an average 21% of their staff.
European unemployment is expected to rise toward 10%, according to economists at IHS Markit. That figure doesn't count millions who are working reduced hours or are on leave and earning partial pay under European government programs that are meant to keep people on payrolls.
In the United States, too, many white collar workers have been hit with pay cuts even while keeping their jobs. That's preferable to a layoff, though the reduced income, multiplied across the economy, is sure to slow consumer spending and depress the economy.
Medical-device maker Boston Scientific is putting most of its full-time workers, outside sales and manufacturing, on four-day work weeks and cutting their pay 20% for at least the next three months. The company has 17,000 workers in the United States.
In Rhode Island and Michigan, 24% of each state's workforce has requested unemployment aid, the worst among all the states, followed by Hawaii with 23% and Pennsylvania and Nevada at 22%.
All told, nearly 12 million people nationwide are now receiving unemployment checks, essentially matching the peak reached in January 2010, shortly after the Great Recession officially ended. That figure is less than the number of applicants in part because it lags behind the number of first-time jobless claims figure by a week. And many people who apply for unemployment aid are turned down and don't actually receive checks.
Many of the jobless whose applications for unemployment aid haven't been accepted are likely self-employed and gig workers. The government's $2.2 trillion economic relief package provides jobless benefits to those groups for the first time. But most states have to set up new computer systems to process those claims — a process that could take weeks in some cases.
The delays in many states in processing applications for contractors and gig workers is a problem for people like Celia Rocha, 44, who lost what she called her “dream job” as a studio assistant to an artist in Los Angeles after California ordered all non-essential businesses to close last month. Rocha, who had worked as a contractor for three years, said she applied for benefits but was turned down. When she has called the state’s phone line to ask questions, she has received only a recording directing her to the website.
“You can’t talk to someone and have your questions answered,” Rocha said. “There’s no information about when we can apply for this” on the state’s website.
On Wednesday, California said it was intending to have a website for the self-employed and contractors active by Monday.
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AP Business Writers Anne D’Innocenzio in New York and Carlo Piovano in London contributed to this report.