Jobs Outlook Appears Gloomy
The unemployment rate is still higher now than it was during the peak of the Great Recession a little over a decade ago, according to the most recent jobs report.
There has been some optimism that the job market is moving in the right direction. Unemployment peaked in the spring at nearly 15-percent, but it has now fallen to about 11-percent.
We have concerns about the employment picture in the fall and winter. Airlines which took government aid, which was just about all of them, have been restricted from laying off employees until October 1st.
With air travel still a fraction of what it was pre-COVID, a massive way of job losses are expected to hit the industry in October. United has hinted that roughly 36,000 jobs could be impacted.
Airlines are not the only ones hurting from the pandemic. Earnings reports have revealed that many companies will be looking to "right size" ahead of 2021.
ExxonMobil has faced significant challenges with oil prices suppressed.
"We do see the potential for further workforce reductions, including overhead and management positions," said Neil Chapman, Senior Vice President of ExxonMobile, in the company's earnings call last week.
The Raytheon Company anticipates thousands of upcoming cuts.
"Some of those [jobs] will come back with volume," said Greg Hayes, Chief Executive Officer at Raytheon, during the recent earnings call.
"Some of [the jobs] will be permanently reduced."
Honeywell has announced that there will be "double digit" job losses in its aerospace division. While it has already made cuts, executives warned more are expected in the fourth quarter.
Boeing has aggressively reduced the size of its workforce, and yet, in its latest call, the large U.S. business said they will continue to look at reducing staffing levels.
"Unfortunately, the prolonged impact of COVID-19, the further reductions in our production rates and the lower demand for commercial services means we'll have to further assess the size of our workforce," said David Calhoun, President and Chief Executive Officer at Boeing.
The hope in the spring was that the virus could be controlled by now and employment would accelerate at the end of the year. The commentary from large businesses shows that is not the case, and more people will become unemployed later this year.
Another factor which has us incredibly worried is the growing number of permanent business closures.
A new report from Yelp showed over half of "temporary" closures have now become "permanent."
McDonald's, Starbucks, Dunkin, and Applebee's are among the numerous food and beverage chains that have announced hundreds of permanent store closures. They have also indicated that more could be ahead as they evaluate their portfolios.
Retailers have been crushed by the pandemic with bankruptcies coming at an almost unbelievable rate.
Tailored Brands and Lord & Taylor became the two most recent retailers to file for bankruptcy, filing for protection on Sunday.
The job market will not be able to recover with all these retailers and restaurants boarding up.
The combination of permanent store closures and large corporations reducing staff sizes paints a grim picture for the rest of the year.