Thousands of job cuts at blue-chip firms a warning sign for global recovery
Washington/New York — Tens of thousands of job cuts announced by blue-chip companies in the past 24 hours are a warning sign for the world’s recovery and emerge just ahead of two key reports forecast to show limited progress in the US labour market.
In one of the biggest layoff announcements since the pandemic caused widespread economic shutdowns, Walt Disney said on Tuesday it is slashing 28,000 workers in its slumping US resort business.
The fallout is not contained to America. Royal Dutch Shell will cut as many as 9,000 jobs as crude’s crash forces billions of dollars in cost savings, while German car parts supplier Continental’s supervisory board in the first week of September approved a restructuring plan that will cut or shift 30,000 jobs worldwide.
Announcements like these point to further challenges in a rebound that’s already slowed after an initial bounce back in May and June. Weekly figures due on Thursday are estimated to show filings for US unemployment benefits remain far above pre-virus levels, while Friday’s jobs report — the last before the November presidential election — is expected to reveal that employers added a half-million fewer workers in September than in August.
“Job losses were at first concentrated in service sector jobs, but in any economic downturn you’re bound to get some more pruning as corporations are trying to protect profit margins,” said Brett Ryan, senior US economist at Deutsche Bank Securities. “You’ll see larger companies that may have been on a certain revenue trajectory before the downturn start to re-evaluate.”
With the pandemic still raging and US legislators having failed so far to extend federal help for the unemployed and small businesses, many key measures in the world’s largest economy look set to remain weak for some time.
Investors responded positively Wednesday to a sign that legislators may be getting closer to a deal. Treasury secretary Steven Mnuchin told CNBC that he expects to reach a one with Speaker Nancy Pelosi and US stocks climbed.
While the first wave of job cuts hit service workers the hardest — in industries such as restaurants and entertainment — economists see other higher-paid positions at increasing risk of layoffs as the recovery grinds slowly forward.
Particularly hard-hit are also companies reliant on travel and tourism, including Disney. American Airlines has warned that it could furlough 19,000 employees, while United Airlines is planning to cut about 12,000.
There are signs, however, that the labour market is gradually improving in certain areas as demand rises from the depths of the pandemic. US companies added 749,000 jobs in September, according to ADP Research Institute data released Wednesday. ADP’s numbers, though, have diverged widely from official government figures in recent months.
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