Lack Of Federal Aid Could Contribute To More Layoffs

The inability of lawmakers and the White House to pass a new stimulus relief package has fueled layoffs as companies say they can’t afford payroll, The New York Times reported.

This week, the Walt Disney Co. announced that it planned to cut 28,000 jobs in Florida and California as attendance limits were imposed in response to COVID-19. United and American Airlines detailed plans to furlough 32,000 employees. In addition, Allstate said it will trim 7.5 percent of its workforce, or 3,800 jobs.

Employers say more cuts are expected to come without more federal assistance, the Times reported.

“The layoffs are an additional headwind in an already weak labor market,” Rubeela Farooqi, chief U.S. economist for High Frequency Economics, a New York-based economic research consultancy, told the NYT. “As long as the virus isn’t contained, this is going to be an ongoing phenomenon.”

A bipartisan deal has eluded House Speaker Nancy Pelosi (D-California), the Republicans and the White House. The Democrat-controlled House of Representatives approved a $2.2 trillion plan to provide more economic relief from the coronavirus pandemic on Thursday (Oct. 1), but it appears to be going nowhere.

Earlier this week, talks between Pelosi and Treasury Secretary Steven Mnuchin collapsed as they failed to strike a deal. The Secretary said his alternative to the House’s aid bill was rejected.

The $600 weekly federal supplement to the unemployed to augment state jobless benefits expired in August.  

Also on Thursday (Oct. 1), it was reported that the number of Americans who applied for jobless benefits fell slightly last week, according to the U.S Department of Labor (DOL). However, the number of unemployed Americans remains at a historic high.

“This doesn’t bode well for the economy,” Gregory Daco, chief U.S. economist at Oxford Economics, the U.K.-based corporate advisor, told the NYT. “When you combine the layoffs with fiscal aid drying up, it points to very soft momentum in the final quarter of the year.”

For the week ending Sept. 26, the advance figure for seasonally adjusted initial claims was 837,000, down 36,000 from the previous week’s revised level. The previous week’s level was revised up by 3,000 from 870,000 to 873,000. Economists were expecting 850,000 filings.