COVID-19

Furloughs turning into permanent layoffs as pandemic drags on

Kristin Schwab Sep 8, 2020
Heard on: Marketplace
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Every month a worker is on temporary unemployment, they have about a 10% to 15% chance of transitioning to a permanent separation, according to one labor economist. Spencer Platt/Getty Images
COVID-19

Furloughs turning into permanent layoffs as pandemic drags on

Kristin Schwab Sep 8, 2020
Every month a worker is on temporary unemployment, they have about a 10% to 15% chance of transitioning to a permanent separation, according to one labor economist. Spencer Platt/Getty Images
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The jobs numbers we got last week for August show some people are getting back to work, with jobs like retail, leisure and hospitality seeing some of the biggest gains.

But in the last week, more and more companies in those very industries have started warning that many of their furloughed employees will turn into permanent layoffs — among them United Airlines, MGM Resorts and Bed Bath & Beyond. What does this mean for job losses as we move into fall?

Cameron Tabrizi, a preschool teacher in Seattle, was on furlough all summer. And here’s how he described his job outlook from start to finish:

“Pragmatically grim to growing into existential despair,” he said.

The pandemic dragged on, and he knew he had health issues that could prevent him from going back to work if his employer wanted him back. In August, after five months of furlough, he got the call.

“They said ‘we can either lay you off or you can come into work,'” Tabrizi said. “They gave this as a mass option to everyone that had been furloughed.”

Tabrizi took the layoff — and he was sort of prepared for it. The longer the pandemic lasted, the more he figured he would not be able to go back to work.  

And this matches up with reality, according to Matt Notowidigdo, a labor economist at the University of Chicago.

“A worker that’s on temporary unemployment, every month they have about a 10 to 15% chance of transitioning to a permanent separation,” he said.

Let’s see … we’re almost entering month seven of the pandemic. So it makes sense that many furloughs are now becoming layoffs. But Heidi Shierholz, senior economist and director of policy at the Economic Policy Institute, said we’re at a new turning point. Job losses are spreading from industries decimated by lockdowns — like hospitality and tourism — and into others that weren’t initially as sensitive.

“Businesses that maybe thought they were going to be fine, unaffected by any social distancing measures are looking up and saying ‘Yeah, we didn’t have a problem then, but now we’re just seeing demand for goods and services has just been depressed,'” Shierholz said.

She said at this point in the pandemic, minimizing job loss is about boosting spending — something that became more difficult for families once that extra $600-a-week in unemployment benefits went away.

COVID-19 Economy FAQs

What does the unemployment picture look like?

It depends on where you live. The national unemployment rate has fallen from nearly 15% in April down to 8.4% percent last month. That number, however, masks some big differences in how states are recovering from the huge job losses resulting from the pandemic. Nevada, Hawaii, California and New York have unemployment rates ranging from 11% to more than 13%. Unemployment rates in Idaho, Nebraska, South Dakota and Vermont have now fallen below 5%.

Will it work to fine people who refuse to wear a mask?

Travelers in the New York City transit system are subject to $50 fines for not wearing masks. It’s one of many jurisdictions imposing financial penalties: It’s $220 in Singapore, $130 in the United Kingdom and a whopping $400 in Glendale, California. And losses loom larger than gains, behavioral scientists say. So that principle suggests that for policymakers trying to nudge people’s public behavior, it may be better to take away than to give.

How are restaurants recovering?

Nearly 100,000 restaurants are closed either permanently or for the long term — nearly 1 in 6, according to a new survey by the National Restaurant Association. Almost 4.5 million jobs still haven’t come back. Some restaurants have been able to get by on innovation, focusing on delivery, selling meal or cocktail kits, dining outside — though that option that will disappear in northern states as temperatures fall. But however you slice it, one analyst said, the United States will end the year with fewer restaurants than it began with. And it’s the larger chains that are more likely to survive.

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