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COVID & Unemployment

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 & Unemployment

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 are the details of President Joe Biden’s coronavirus relief plan?

The $1.9 trillion plan would aim to speed up the vaccine rollout and provide financial help to individuals, states and local governments and businesses. Called the “American Rescue Plan,” the legislative proposal would meet Biden’s goal of administering 100 million vaccines by the 100th day of his administration, while advancing his objective of reopening most schools by the spring. It would also include $1,400 checks for most Americans. Get the rest of the specifics here.

What kind of help can small businesses get right now?

A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.

What does the hiring situation in the U.S. look like as we enter the new year?

New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.

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