The recent spike in joblessness has attracted no small share of attention for the very good reason that the figures taken from any angle are incredibly eye-catching. Unemployment filings came in at roughly 5 million last week, according to U.S. Labor Department statistics, a brutal figure that still managed to be an improvement over the two previous weeks when unemployment figures came in north of 6 million, or the week prior when the record-breaking weeks began with a wave of over 3 million unemployment filings.
And as roughly as the official Labor Department figures are which as of today (April 21) were north of 22 million, PYMNTs most recent consumer survey, Navigating The COVID-19 Pandemic: The Post-Pandemic Reset indicates that the damage to employment is worse than the official figures show. According to PYMNTS research, as of April 11, 46.5 percent of consumers (roughly 118.2 million people) were working or earning incomes, compared to March 6, when 59.3 percent (158.1 million people) reported the same. That means that 39.9 million people had lost their jobs in just over one month — nearly doubling the official BLS job lost count thus far.
There is a reason that unemployment is getting most of the attention — the figures are staggering no matter which variation one uses. But right under that disturbing marquee is a secondary figure getting far less media coverage that is nearly as disturbing. For all the workers holding on to their jobs, many are facing pay cuts, some quite steep, as firms struggle to stay afloat during the unprecedented financial slowdown down in progress.
And those pay cuts are hitting a vast breadth of firms and employees at all levels of the corporate ladder, including many sitting on rather high perches. Executive-level workers have taken salary hits in the real estate, retail, media, logistics and even medical services industries as firms scramble to respond to radically and suddenly reduced revenues are moving to quickly scale back compensation packages of all sizes.
NPR receives nearly one-third of its annual revenue from corporate sponsors, who suddenly can’t afford to make their annual donations. That leaves the public broadcasting service facing a revenue shortfall for 2020 of between $12 million and $15 million. New CEO John Lansing detailed the coming executive pay cuts in an email to employees, describing them as a mechanism for avoiding layoffs.
“We do not have any position eliminations on the table now,” Lansing said in the email, which was reviewed by The New York Times, “and it is our goal to avoid them as much as is reasonably possible.”
And public radio executives will be far from alone, according to Wall Street Journal reports indicate that for the last several weeks, firms of all descriptions have been looking to trim worker hours and cut employee pay as a stop-gap method to push off the more drastic move of full-scale layoffs. As of this week, with a little over a month left to go before the federally recommended start of the phased ending of social distancing guidelines, those cuts are moving up the corporate ladder through executive teams and even into the C-Suite.
Among large, public U.S. companies, at least 336 have announced cuts to executive salaries through Friday, including such household names as FedEx, Marriott International and United Airlines Holdings. United’s team has made particularly deep reductions — CEO Oscar Munoz and President J. Scott Kirby (who will step into the CEO role at the end of May) both will forgo salaries through at least June 30, while all company officers are giving up half of their base salaries through that time as well and non-employee board members are forgoing all of their cash compensation in the second and third quarter.
However, executive pay cuts are not the most surprising thing occurring during the current downturn. That rather dubious distinction goes to emergency room doctors and other front-line workers who face, on top of exposure to a plague and a shortage of personal protective equipment, pay cuts to go with their greatly extended hours. Those pay cuts, according to CBS reporting, can be as little as 10 percent and as much as 40 percent.
And if you are wondering how the busiest people working in medicine today are facing pay cutes — that comes down to the recent structure of most hospitals, which is built on the profit center that is elective procedures. According to JPMorgan Chase, most hospitals at least half and often more of their revenue from elective procedures which have temporarily been shut down wholesale due to the COVID-19 pandemic.
Doctors, Dr. Leslie Simon, the chair of the emergency medicine department at the Mayo Clinic, will keep coming to work heroically due to their sense that “we are all in this together and we understand that this was necessary.”
That said, she noted, doctors and residents paying off heavy medical school debt, are still human and these pay cuts are hitting them incredibly hard.
“We still have student loans. We have kids to send to college. We have mortgages,” she said.
Mortgages, notably, that they will still have when COVID-19 is over — and for which they may or may not be eligible for federally mandated relief. And even if eligible, depending on their lender, the terms of that forbearance could be fairly unappetizing on the backend. And of course, those residents aren’t alone. They are part of a growing mass of tens of millions of Americans facing paychecks that have suddenly ceased entirely and mass of tens of millions more that have seen their paychecks cut by as much as half.
And those diminishing income pictures are reflected in the consumer shopping behavior PYMNTS observed as of its last consumer survey. As of April 11, 85.7 percent of consumers reported shopping for groceries on April 11, for example, compared to 87.4 percent who did so on March 6. In early March, 82 percent of consumers noted they were ordering takeout and delivery from restaurants — by April 11 (long after the point where delivery was the only way to eat a restaurant at all, as opposed to early March when they were still open) we found that 81 percent of consumers were ordering takeout and delivery, a drop of 1 percent.
These differences may not appear significant, but they translate to 4.5 million fewer people shopping for groceries and 2.5 million fewer ordering food from restaurants.
And given how hard-hit consumers are — to the point they are now cutting to the bone on expenses and buying less food to eat — it is unsurprising that their expectations for a speedy return to economic normalcy are diminishing the longer the economic shutdown extends.
Among those we spoke to, only 47.9 percent expect to resume their normal activities once the pandemic is over — the majority of consumers believe the pandemic has forever altered their daily lives. Almost a third (32.1 percent ) report they will increase their home-based activities while lowering their out-of-home activities post COVID-19. In comparison, 16.1 percent say they will not resume any of their pre-outbreak activities once the pandemic has passed.
That varies some by demographic: millennials are the most likely to plan to resume their normal routines after the pandemic ends, with 53.1 percent saying they intended to do so. Baby boomers and seniors, on the other hand, are the least likely to say they planned to go back to their routines after the pandemic ends, instead preferring to do more activities from home.
But consumers across demographics are increasingly concurring on two points. The first is that when it comes back to normal — no matter the economic costs they are increasingly enduring — consumers want a vaccine first and foremost. Our analysis shows that 48.8 percent of consumers required a vaccine to be available before they would return to their routines, up from 40.5 percent on March 27 and 39.7 percent on March 17.
The second is that, given that high bar and the deep hole many are finding themselves sinking into economically speaking, consumers are increasingly expecting a long walk back. The average consumer now expects the pandemic to last for another 178 days — almost six months up from the 145 days and 138 days they believed it would last on March 27 and March 17, respectively. But nearly half of all consumers — 44.7 percent — believe six months is the best we can hope for, and that the pandemic could well be longer.
Meaning consumers have a long time to survive — and wages that are falling fast on which to survive.