Massive US layoffs continue even as businesses reopen

Washington’s iconic fish market has reopened but the prospects for a wider recovery of the US economy remain uncertain. ©AFP/File JIM WATSON

Layoffs caused by the coronavirus pandemic have reached 44.2 million in the US even as businesses try to reopen, and analysts warn of continuing damage to the world’s largest economy as COVID-19 shows few signs of abating.

Wall Street stocks plunged Thursday in their worst performance since March, reversing recent momentum as traders were spooked by resurgent cases of the virus in parts of the country and new Labor Department data showed another 1.54 million workers filing for unemployment benefits last week.

The massive layoffs have become routine since shutdowns to stop the coronavirus from spreading began in mid-March, reaching their peak later that month and declining since.

Some workers are back at work as states reopen, but the total for the week ended June 6 is still well above any figure seen during the global financial crisis in 2008, even though it fell 355,000 from the prior week.

Rubeela Farooqi of High Frequency Economics said the data showed the US economy was clearly not back to normal.

“States and businesses have reopened, but activity remains restricted and subdued, which will likely result in ongoing layoffs over coming weeks,” she said in an analysis.

COVID-19 remains a stubborn threat in the United States, which continues to record around 20,000 new cases every day with few signs of reduction. 

States like Texas and North Carolina are seeing more patients hospitalized with the virus than a month ago.

– Recovery or no benefits –

Federal Reserve officials on Wednesday released forecasts projecting the US economy would contract by 6.5 percent this year, and Fed Chairman Jerome Powell warned that some workers may not find jobs for a long time.

But President Donald Trump lashed out Thursday, saying the Fed had been “wrong so often.” 

“We will have a very good Third Quarter, a great Fourth Quarter, and one of our best ever years in 2021,” he said on Twitter.

White House economic advisor Larry Kudlow gave his own mixed review of Powell in an appearance on the Fox Business Network, even offering to provide “media training” for the central bank chief.

“I do think Mr. Powell could lighten up a little… You know, a smile now and then, a little bit of optimism,” Kudlow said. “But basically, I don’t see the Fed as an obstacle here.”

Meanwhile, despite signs of a second wave of cases in areas where life is starting to return to normal, Treasury Secretary Steven Mnuchin said: “We can’t shut down the economy again.”

“I think we’ve learned that if you shut down the economy, you’re going to create more damage,” Mnuchin said on CNBC.

The comments didn’t stop Wall Street traders from blundering through the day, pulling main indices back from recent gains that saw the tech-rich Nasdaq hit records two days in a row and the broad-based S&P 500 erase its losses for the year.

The benchmark Dow Jones Industrial Average dropped 6.9 percent at the close, while the Nasdaq was 5.3 percent in the red and the S&P down 5.9 percent.

The Labor Department data showed about 20.9 million people were receiving unemployment payments in the week ended May 30, down from 21.3 million the week before — indicating that people were either returning to work or had their initial claims denied.

All told, the report was in line with May’s unemployment rate, which declined to 13.3 percent from 14.7 percent in April as the US economy added 2.5 million jobs.

However, the Bureau of Labor Statistics said the actual jobless rate was likely three points higher that month, while in April the rate was closer to 20 percent overall because of an error in which workers were misclassified as employed when they had been laid off because of the pandemic.

Ernie Tedeschi, head of fiscal analysis at investment banking firm Evercore ISI, said the data seem at odds with each other.

There is “evidence that some firms are indeed hiring. But other firms are clearly still laying off, perhaps closing down,” he tweeted.

A separate Labor Department report released Thursday showed a better-than-expected rise in producer prices of 0.4 percent in May, reversing a 1.3 percent decline in April.

Chris Stein
(AFP)