It’s troubling to notice that six months into the Covid-19 pandemic, major corporations are continuing to layoff employees and temporary furloughs are turning into permanent job losses.
This may be a worrisome sign that companies are concerned about the future and feel the need to reduce staff. This frightening trend will increase once the restrictions are lifted off of companies that received stimulus money from the government with the proviso to retain employees through Sept. 30. For instance, major airlines that collectively took $25 billion in “bailout” money have already announced massive layoffs will start in October.
According to Bloomberg, about 200,000 job cuts have been announced recently. The companies range the spectrum, including Ford, MGM Resorts, Coca-Cola, Salesforce and Boeing. Corporations are restructuring their business lines, closing stores, offering early retirement packages and not bringing back people who were furloughed, all in an effort to reduce costs and save money.
In a pivot toward high-net-worth clients and deploying more technology, HSBC “plans to offload business units, cut $4.5 billion in costs and lay off 15% of its global workforce.” This is in addition to tens of thousands of workers who were already laid off from the large global bank.
Jobs that were deemed secure at the beginning of the pandemic may now be lost. Back in March, a number of prominent CEOs pledged not to cut any jobs in 2020. Morgan Stanley CEO James Gorman said, at the time, to his employees, “I am sure some, if not many, of you are worried about your jobs. While long term we can’t be sure how this will play out, we want to commit to you that there will not be a reduction in force at Morgan Stanley in 2020.” Gorman was joined in this pledge by an array of other high-profile CEOs in a wide variety of business sectors.
Marc Benioff, the cofounder and CEO of Salesforce, was one of the major leaders in this campaign.
Despite Benioff’s pledge and his company recently being added to the Dow Jones Index, Salesforce announced that it will lay off 1,000 workers.
Now that time has passed and memories have faded, it looks like the layoffs are coming. Alan Johnson, a leading compensation management consultant, predicts that about 5% to 10% of workers at banks will be let go. The reasons for the potential downsizings are due to economic concerns involving the recessionary climate, likelihood of loan losses, unabating high unemployment, low interest rates and regulatory pressure to cut dividends. Managers have said that working from home has shown that they don’t need as many people as they previously thought.
Investment management DoubleLine CEO and billionaire Jeffrey Gundlach warned of white-collar layoffs saying, “COVID-19 reveals who’s ‘swimming naked.’” This relates to a famous Warren Buffet adage, “When the tide goes out, you find out who is swimming naked.”
Gundlach contends that as people worked from home, he got a sense of what his employees were really doing. He noticed that junior workers rose to the occasion and was disturbed by the disappearance of mid-level management. He complained, “I wonder where they’ve gone. I’m starting to wonder if I really need them.” Gundlach said that he checked with peers who felt the same way. Based on his personal experiences and stories shared by his peers, Gundlach predicted a “wave of more higher-end unemployment” hitting white-collar workers making more than $100,000 per year.
Indeed, one of the largest job aggregation sites, released a report indicating the direction of new job postings in the United States. The job site’s data revealed a massive drop in listings during March, April and May—some of the most difficult months of the Covid-19 pandemic. At that time, job postings plummeted nearly 40% compared to the same period last year.
According to Indeed, “The trend in job postings—a real-time measure of labor market activity— is 20.3% lower than in 2019, as of August 14.” White-collar job advertisements, such as software development and banking and finance, declined. Indeed claims that job postings for higher-wage occupations have taken the biggest tumble. “Postings in higher-wage occupations are now 28% below trend, versus 12% below trend for lower-wage occupations.”
With the resurgence of Covid-19 in many states, an upcoming U.S. presidential election and civil unrest, management lacks clarity as to what the future holds. It’s easier for them to just hold off on hiring and make job cuts.
Unfortunately, furloughs are turning into layoffs, as companies are in a cost-cutting mode. Back in May, I contended that “furlough” implies that a person will soon return to his or her job. The company hopes that business conditions will improve and it can bring back its employees. In this current combination of a health, economic and job crisis all rolled into one big mess, using the term is misleading and disingenuous. It’s a feel-good ruse constructed to make it seem that everything will be okay and the corporation is actually in sound financial shape.
Many of the employees they’ve had to lay off in the face of the pandemic might not be returning to their old jobs anytime soon. Some large companies won’t have enough customers to justify it. Moreover, some small businesses won’t likely survive at all, despite aid provided by the federal government. Companies won’t be able to rehire people until they get some sort of clarity or actually see a resurgence in business. For the companies that are going through bankruptcy, like J.C. Penney and Hertz, they’ll have to let go of more people and won’t be hiring for a while. The airlines have already said that they don’t expect passengers to return anytime soon. There just won’t be enough work to rehire furloughed people
CNBC reported that companies including C.H. Robinson, Mohawk Industries, Textron and Stanley Black & Decker—among others—have said, “Temporary salaried layoffs have converted into permanent reductions.”
The stock market, which had amazingly rebounded from the pandemic lows, is at new high levels. It looks like investors are optimistic about the future of the American economy. They also believe that large-scale cost reduction, including downsizing workers and utilizing more technology, will help improve profits. This means that more people will continue to be laid off or not be asked to return from furlough, as the companies want to save money, increase profits and boost their stock prices.