A Blog by Jonathan Low


May 8, 2020

77 Percent of 33 Million Who Lost Jobs Due To Covid Expect To Be Rehired. But...

While their optimism is encouraging, the reality is that as many as 42% of job losses may be permanent because so many businesses cannot afford to reopen or because consumers are far more wary of returning to normal.

Early indicators from states like Georgia that aggressively reopened show that consumers have been hesitant, meaning any recovery is likely to be drawn out rather than quick. JL

Heather Long and Emily Guskin report in the Washington Post:

The vast majority of laid-off or furloughed workers - 77% - expect to be rehired by their previous employer once stay-at-home orders are lifted. 6 in 10 say it is “very likely” they will get their old job back. But there’s concern that many of these workers are too optimistic. A new report from the University of Chicago predicts 42% of the recent layoffs from the pandemic will result in permanent job losses. Many companies are going bankrupt or shutting down permanently. (And) even after parts of the economy reopen, many people will be hesitant to shop, travel and go out to eat as they did before.

Jose Mogna of Miami has been checking his phone constantly for a text or call from his manager telling him it’s time to return to his job at a construction supply company. Mogna was furloughed at the end of March, making him one of more than 30 million Americans suddenly without a job during the pandemic, but he’s hopeful he will be called back soon.
The vast majority of laid-off or furloughed workers — 77 percent — expect to be rehired by their previous employer once the stay-at-home orders in their area are lifted, according to a nationwide Washington Post-Ipsos poll. Nearly 6 in 10 say it is “very likely” they will get their old job back, according to the poll, which was conducted April 27-May 4 among 928 workers who were laid off or furloughed since the outbreak began. But there’s concern that many of these workers are too optimistic about being rehired given how much uncertainty remains about health and business conditions in the year ahead.
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And the scope of the problem keeps mounting. The Labor Department reported on Thursday that 3.2 million Americans filed unemployment claims last week, bringing the seven-week total for people seeking jobless benefits to more than 33 million. The unemployment rate has jumped from around 3.5 percent earlier this year to close to 20 percent now, many economists believe.
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The United States is facing its biggest unemployment crisis since the Great Depression, as many firms have been quick to let employees go. Economists say the best chance for any sort of recovery is to get as many workers as possible back into their old jobs. Much of that will depend on how reopening goes.

“I figure they might call me at the end of this month to start again in June. But I don’t know,” said Mogna, 54, who sells materials to construction sites. “If I worked in a restaurant, I probably wouldn’t be that optimistic. But construction is still going.”
Going back to a prior job is typically much easier — and faster — than searching for an entirely new job. It also gives laid-off workers a greater sense of comfort about their finances. Studies show that workers who believe they are only a few weeks away from a steady job again are less likely to spiral into a depression or stop paying major bills.

But economists warn the optimism could be misplaced. The longer people are out of work, the less likely they are to be called back. In an alarming trend, companies such as General Electric and Nordstrom initially announced they were furloughing employees, a temporary layoff where workers aren’t paid but usually keep their health insurance. But now some of those furloughs are becoming permanent layoffs. MGM Resorts just warned it might make its furloughs permanent as well if businesses does not rebound this summer.

A new report from the Becker Friedman Institute at the University of Chicago predicts 42 percent of the recent layoffs from the pandemic will result in permanent job losses. There are two big issues: First, many companies are going bankrupt or shutting down permanently, so they won’t need workers. Second, even after parts of the economy reopen, many people will be hesitant to shop, travel and go out to eat as they did before. Businesses operating at half capacity or switching to online or takeout don’t need nearly as many workers.
“Even if a miracle cure falls out of the sky in July, it’s going to take demand a while to pick back up,” said Betsey Stevenson, an economics professor at the University of Michigan. “There’s no way travel or retail look the same and brings everybody back.”
Typically, fewer than half of laid-off workers expect to return to their previous job, but there’s hope this time could be different, since many business shutdowns are likely to be temporary, said economist Till von Wachter of the University of California at Los Angeles.

“Helping workers keep attached to their prior employers could speed up the recovery,” said von Wachter.
Economists have urged companies to furlough workers instead of laying them off, since a furlough allows for some sort of employer-employee relationship to remain even though a worker is no longer going to the job. Mogna has been able to keep his employer-sponsored health insurance. He has had to make his monthly payments, but it’s been a big help to know he has the same insurance during a global pandemic.
Layoffs and furloughs skyrocketed in mid-March and have kept climbing as some businesses that initially tried to stay open found it was impossible. Americans still widely oppose reopening most businesses and remain hesitant to go to stores and restaurants.
Unease is rising among many of these jobless workers as they approach nearly two months out of a job. Roughly 1 in 4 laid-off workers say they will be in “real financial trouble” in less than a month if nothing changes. Among those laid off, 43 percent say the outbreak has been a “serious source of stress” in their life, compared with 29 percent among other Americans, the Post-Ipsos poll finds.

Chauncey Davis is worried about losing his place in Memphis. The 44-year-old father has struggled to pay his rent since he lost his job as a cook at Checkers in March as business slowed during the pandemic. He has been trying to input his information on the Internal Revenue Service website in the hope of getting a $1,200 relief payment to tide him over until he can find a new job, since he doesn’t think it’s likely he’ll be brought back.
“Right now, I’m struggling just to pay for meals,” Davis said. “I’ve applied for unemployment twice but gotten no answer.”
Congress has enacted $2.5 trillion in aid for struggling businesses and workers who have been hard hit by the mandates to stay at home to try to stop the spread of covid-19. Most of those laid off — 61 percent — say they have received a $1,200 or more relief check from the federal government to help offset expenses, but 38 percent have not.

It’s a similar story regarding unemployment insurance. Congress bumped up weekly unemployment checks by $600, meaning many workers are eligible for about $1,000 a week in unemployment compensation. But they have to be able to complete their application and receive the aid, a process that has been extremely slow in some states. In Florida, fewer than 30 percent of the 1.8 million people filing unemployment claims have been paid so far because of problems with the filing system. In other states, such as New York, many jobless workers had to call dozens of times a day for weeks to finalize their application.
Half of the laid-off workers say they have been able to apply for unemployment, but under 3 in 10 have received money so far, the Post-Ipsos poll finds. Of those who tried to apply but were unsuccessful, 4 in 10 report that they could not complete the application because phone lines were so busy that they could not get through or their state’s unemployment website wasn’t working.
The coming weeks are likely to be critical to see how many unemployed workers begin to transition back to work. The new Small Business Administration loans and grants — known as the Paycheck Protection Program — require firms to rehire employees by the end of June.

Even if a large share of workers do get called back, millions of Americans are still likely to remain jobless. The nation’s unemployment rate is widely expected to hit 20 percent this spring and drop only to about 10 percent by the end of the year, meaning one in 10 workers would still be out of work at the holidays.
The Washington Post-Ipsos poll was conducted April 27-May 4 through Ipsos’s KnowledgePanel, a large online survey panel recruited through random sampling of U.S. households. Results among the sample of 928 people who were laid off or furloughed during the coronavirus outbreak have a margin of sampling error of error margin of 3.5 percentage points.


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