New Covid-19 Layoffs Make Job Reductions Permanent

Summary

WSJ article headed New Covid-19 Layoffs Make Job Reductions Permanent, by Patrick Thomas, Sarah Chaney and Chip Cutter, dated Aug. 28, 2020 (printed 9/10/2020). It reports a new wave of layoffs as big companies reassess staffing plans, citing MGM Resorts International laying off 18,000 furloughed workers and Salesforce.com notifying 1,000 of its workforce of layoffs. It reports that American Airlines said it will furlough 17,500 union workers and move forward with 1,500 layoffs in management unless it receives more federal aid, and that airlines took $25 billion in federal funds on condition of not terminating employees through the end of September. It also cites a U.S. unemployment rate of 10.2% in July and unemployment applications hovering around one million a week.

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“New Covid-19 Layoffs Make Job Reductions Permanent.” Original at docs.house.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/hhrg-116-vc00-20200901-sd405-61a99b631b70-5007ceb876/, SHA-256 61a99b631b702a2013f3251a953328e14a91ceda4cbdda77b6c7baceeb2a1b07.

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9/10/2020 New Covid-19 Layoffs Make Job Reductions Permanent - WSJ

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https://www.wsj.com/articles/new-covid-19-layo s-make-job-reductions-permanent-11598654257

BUSINESS

New Covid-19 Layoﬀs Make Job Reductions
Permanent
As companies brace for years of pandemic-related disruption, thousands of furloughed workers are told
they won’t be coming back

American Airlines said that unless it receives more federal aid, it will furlough 17,500 union workers
and move forward with 1,500 layo s in its management ranks this fall.
PHOTO: PATRICK T. FALLON BLOOMBERG NEWS

By Patrick Thomas, Sarah Chaney and Chip Cutter
Aug. 28, 2020 6 37 pm ET

Listen to this article
9 Minutes

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9/10/2020 New Covid-19 Layoffs Make Job Reductions Permanent - WSJ

A new wave of layoﬀs is washing over the U.S. as several big companies reassess staﬃng
plans and settle in for a long period of uncertainty.

MGM Resorts International MGM +2.81% ▲ and Stanley Black & Decker Inc. SWK +0.95% ▲
recently told some employees furloughed at the outset of the coronavirus pandemic that
they wouldn’t be put back on the payroll. And companies bringing back the majority of
furloughed workers, including Yelp Inc. YELP +1.23% ▲ and Cheesecake Factory Inc.,
CAKE -1.80% ▲ are making reductions as they adjust to the new reality that many
coronavirus-related closures won’t be resolved this fall.

More fresh layoﬀs at big employers loom. A day after Salesforce.com Inc. CRM +0.45% ▲
posted record quarterly sales, the business-software company notiﬁed its 54,000-person
workforce that 1,000 would lose their jobs later this year. Coca-Cola Co. KO +0.51% ▲ said
Friday it plans to lay oﬀ some employees and oﬀer voluntary buyouts to about 4,000
employees in the U.S. including Puerto Rico as well as Canada. American Airlines Group
AAL +0.88% ▲ Inc. and United Airlines Holdings Inc. UAL +2.47% ▲ have said more than

53,000 workers could be aﬀected in about a month if the airlines don’t receive another
infusion of funds from the government.

The outlook reﬂects an acceptance by corporate executives that they will have to contend
with the pandemic and its economic fallout for a longer period than they had hoped. Some
CEOs and other executives suggest more pain is ahead, said David Rubenstein, co-
executive chairman of Carlyle Group, CG -0.08% ▲ a private-equity ﬁrm with around $220
billion in assets under management.

“Privately, some of them may hint that they probably won’t need as many workers as they
once thought,” Mr. Rubenstein said. “They’ll have to reinvent their businesses in ways
that they hadn’t done before.”

The latest layoﬀs come as there have been glimmers of an economic recovery. Many
employers have rehired some workers after cutting jobs this spring, pushing the U.S.
unemployment rate down to 10.2% in July after it nearly touched 15% in April, according
to federal data. Some salaried workers and executives are seeing their pandemic pay cuts
restored. That has led some to theorize that the economy is increasingly proceeding on
two tracks, as companies modifying operations or shutting down entire divisions
determine that they need fewer people, especially lower-income workers.

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A survey of human-resources employees released by Randstad RiseSmart found nearly
half of U.S. employers that furloughed or laid oﬀ staﬀ because of Covid-19 are considering
additional workplace cuts in the next 12 months.

While Cheesecake Factory is recalling most workers, some locations are closing for good, resulting
in 175 layo s.
PHOTO: PATRICK T. FALLON BLOOMBERG NEWS

New applications for unemployment beneﬁts, a proxy for layoﬀs, have hovered around
one million a week for much of the summer. A drop in jobless claims one week tended to
be snuﬀed out within a few weeks when claims rose again. Summer unemployment has
improved since March, when a peak of about seven million people applied for jobless
beneﬁts in one week, but the numbers remain stubbornly high.

Economists say the new layoﬀs reﬂect a shift in corporate thinking toward a more
protracted crisis.

“Companies that thought they could either cut wages temporarily or cut costs
temporarily or hold on are now ﬁnding out that the weakness of the pandemic is now
longer than they hoped,” said Diane Swonk, chief economist at Grant Thornton.

Following casino shutdowns and furloughs in March, MGM Resorts said it would lay oﬀ
18,000 furloughed workers in the U.S. as the global travel slowdown impedes the
gambling industry’s recovery. The job cuts, which start Monday, represent about one-
fourth of the company’s prepandemic workforce of 68,000 U.S. employees.

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9/10/2020 New Covid-19 Layoffs Make Job Reductions Permanent - WSJ

American Airlines said that unless it receives more federal aid, it will furlough 17,500
union workers and move forward with 1,500 layoﬀs in its management ranks this fall.
Flight attendants, 8,100 of whom are furloughed, would be the most aﬀected. Airlines
agreed not to terminate employees or cut pay rates through the end of September as a
condition of taking $25 billion in federal funds.

United Airlines said it would furlough 2,850 pilots, which is 600 more than it had
anticipated, as it seeks more federal aid. United has warned that as many as 36,000 of its
employees could be eliminated Oct. 1 if the airline doesn’t get more government help. The
union that represents United’s pilots called it tragic that the carrier hasn’t provided more
options to allow pilots to leave voluntarily. Delta Air Lines Inc. DAL +1.61% ▲ said it would
let go of 1,941 pilots.

After furloughing or reducing hours for more than 10,000 workers earlier this year, tool
maker Stanley Black & Decker said that in October it will permanently lay oﬀ 1,000 of
them but bring back 9,300 to a full-time schedule. Chief Executive Oﬃcer James Loree
told investors on a recent call the cuts are part of a $1 billion cost reduction.

“It paves the way for us to manage successfully through any reasonable economic
scenario which may unfold in the coming months,” he said.

Hundreds of furloughed workers at C.H. Robinson Worldwide Inc., CHRW +0.88% ▲ one of
the largest freight companies in North America, won’t be put back on the payroll, in part
because their positions have been automated, the company told investors on a recent
earnings call. The job cuts will become “permanent cost savings from our investments in
tech,” said Bob Biesterfeld, chief executive of C.H. Robinson.

Yelp is among a number of companies including Walt Disney Co. DIS +1.39% ▲ and General
Motors Co. GM that are restoring executive and white-collar worker salaries to
previous levels, after making some employees take pay cuts in the spring. But even as Yelp
brings back most of the 1,000 workers it furloughed earlier this year, the changing
business picture required eliminating 63 roles, most of them in recruiting or real estate,
according to a letter to staﬀ from CEO Jeremy Stoppelman.

“Sadly, this pandemic will remain part of our lives for some time,” Mr. Stoppelman said in
the note.
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After furloughing more than 40,000 in March, the restaurant operator Cheesecake
Factory is recalling most workers as it gradually reopens dine-in service. But some
locations are closing for good, the company said, resulting in 175 layoﬀs.

For small businesses, 22% of employees furloughed between March and June had been
laid oﬀ by July, while 28% were still furloughed, according to a recent study by Gusto, a
payroll and beneﬁts company for more than 100,000 small-business clients.

Many employees furloughed in the spring who haven’t been brought back to work most
likely won’t have a job to return to, said Daniel Sternberg, head of data science for Gusto.
That is because many small businesses have only partially reopened or have had to roll
back reopening plans and sales are nowhere close to pre-pandemic levels.

“There’s not much evidence to suggest that there is going to be this massive bringing
people back on the payrolls,” Mr. Sternberg said. “Businesses are also retooling in a lot of
situations, and the way they are retooling requires lower head counts. They are trying to
do what they can do to survive long term.”

Lenore Estrada, co-founder of Three Babes Bakeshop in San Francisco, had to furlough 20
of her 26 employees in March. She brought back some of them in April and May when she
got a Paycheck Protection Program loan, but revenue at the bakery is still down 40%
compared with a year ago. When the PPP money ran out, Ms. Estrada had to permanently
lay oﬀ many of her workers earlier this month. She has about a dozen left, but says she is
losing $15,000 a month and may have to cut more.

“The assumption is if I get no outside assistance, how would I make this work?” she asked,
then added, “I’m assuming that help isn’t coming.”

Millions of Americans have been jobless for several months, suggesting it will take a while
for the U.S. economy to recover from the damage wrought this spring. The number who
were unemployed between 15 and 26 weeks rose to 6.5 million in July, the highest reading
for records that go back to 1948, according to the Labor Department. The number of
Americans reporting themselves as unemployed because of permanent layoﬀs was about
twice as high in July as in March, when the pandemic struck.

“It’s becoming harder and harder to imagine that these people will be brought back in,”
said Josh Wright, chief economist at Wrightside Advisors, an economics consulting ﬁrm.

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9/10/2020 New Covid-19 Layoffs Make Job Reductions Permanent - WSJ

—Alison Sider contributed to this article.

Write to Patrick Thomas at Patrick.Thomas@wsj.com, Sarah Chaney at
sarah.chaney@wsj.com and Chip Cutter at chip.cutter@wsj.com

Appeared in the August 29, 2020, print edition as 'Layoﬀs Resume As Firms Reassess Outlook.'

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