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Hotels and airlines are just the beginning - here's how the coronavirus recession could cause job losses across the US economy
Hotels and airlines are just the beginning - here's how the coronavirus recession could cause job losses across the US economy
Joseph Zeballos-Roig,Madison HoffMar 26, 2020, 01:08 IST
Robert Nickelsberg/Getty ImageA Delta Air Lines stewardess sells food on a flight to California in 2014.
The economic fallout from the coronavirus pandemic threatens to wipe out many different kinds of jobs in the US, not just in hospitality and travel but also in spaces including sports and entertainment as well as manufacturing.
Millions of Americans are projected to file for unemployment benefits in the coming weeks.
Several industries are pleading with the federal government for a bailout.
A recession from the novel coronavirus outbreak is a near certainty, economists say. And the fallout threatens to wipe out a substantial number of American jobs.
"There is a real danger that the economic crisis that comes out of this health crisis is worse than what we experienced in 2008," Jason Furman, formerly a top economist for the Obama administration, recently told Business Insider. "There is a complete shutdown of economic activity across the entire planet ... of a type we've never seen before."
The unprecedented shutdown has closed businesses across the nation in an attempt to prevent the virus from spreading. And it's starting to unleash a tidal wave of layoffs across sectors that power the American economy.
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Many major companies, once titans of industry, are now in dire financial straits and laying off workers. And more are pleading for a bailout from the federal government, such as airlines and hotels.
Early unemployment claims and projections suggest a skyrocketing number of Americans are filing for benefits.
Economists are forecasting that an unprecedented number of Americans filed for unemployment in the week ending March 21.
The chart above illustrates projections from Goldman Sachs, Citi, Bank of America, Morgan Stanley, UBS, and the Economic Policy Institute, a progressive think tank. The Labor Department will release the actual initial unemployment claims figures for last week on Thursday morning.
Analysts at these firms estimated that anywhere from 860,000 to 4 million Americans filed to receive unemployment insurance, a record-breaking spike.
That would be in line with initial figures pouring out from states across the nation, which suggest the number of Americans filing for unemployment is skyrocketing— and putting state safety nets under significant strain.
Last week, 281,000 claims were filed, according to the Labor Department. Nevada, Hawaii, and Montana are three states forecasted to lose the most jobs as a share of their labor force, according to an analysis from the Economic Policy Institute.
Major US airlines are being ravaged by the virus' economic fallout, and they're likely to receive emergency federal funding.
The coronavirus pandemic compelled the mass cancellation of travel plans from consumers and businesses alike, severely damaging the airline industry. Countries have also sealed off their borders to thwart the spread of the virus.
Delta Air Lines, for example, moved to drastically cut costs by parking half its fleet and sending 10,000 employees home without paid leave. United Airlines said it could take similar steps and lay off more than half of its workers in the coming months.
The four major US airlines — American, Delta, United, and Southwest — are seeking a $50 billion bailout from the Trump administration, which supports the idea.
The proposed bailout is part of a $2 trillion stimulus bill in the Senate, the largest federal rescue package in US history. Around $8 billion of it would be directed to aid cargo carriers.
But airlines have come under fire for using their profits from hiked passenger fees and cheap fuel during the long bull market to buy back stock instead of, say, improving labor conditions or creating a financial cushion for just this kind of crisis.
Boeing is another major aerospace firm seeking help, in the form of a bailout worth billions. Trump has expressed interest in extending emergency federal aid, saying, "we have to absolutely help Boeing."
Airlines employ around 750,000 people in the US, according to the Financial Times.
Hotels across the country are laying off workers or cutting their hours.
Like the airlines, hotels have also been ravaged by massive numbers of Americans canceling their travel plans in the fallout from the coronavirus.
Marriott International told workers last week that it was furloughing tens of thousands of them as it closes properties around the world, The Wall Street Journal reported.
The American Hotel and Lodging Association, a trade group, said that in the coming weeks nearly 4 million jobs could be wiped out, or almost half of all jobs in the hotel sector.
Travel spending in the US is forecasted to plunge 31% this year — that would be six times worse than in the aftermath of 9/11 — according to a report from the US Travel Association.
Those figures are raising alarm among hotel executives, who met with President Trump last week to request a $150 billion bailout. They said the coronavirus' impact on their business has been bigger than "September 11th and the Great Recession of 2008 combined," according to the head of the AHLA.
Trump's hotels also took a financial hit, and at least 200 workers were laid off.
Many major sport and entertainment cancellations are affecting the job safety of event workers.
As people are being advised to stay away from large crowds to stop the spread of the coronavirus, sports and entertainment events have been canceled or postponed en masse. Notable events like March Madness and the South by Southwest festival have been cancelled.
As games are cancelled or postponed, sports-betting companies are cutting costs to keep their companies from going under.
Many employers in entertainment have started laying off workers. According to a list compiled by Forbes, Circuit of the Americas and Cirque du Soleil are among the entertainment companies laying off workers. Cirque du Soleil has reportedly laid off 4,679 employees, or 95% of its workforce.
Sports and other event cancellations also impact the job safety of thousands of vendors and event staff members, according to Politico.
Goldman Sachs predicts it will take years for the cruise line industry to bounce back from cancellations and a decline in travel demand.
The cruise line industry is also taking a big hit from the coronavirus outbreak after the US State Department advised people not to travel by cruise ship, especially older people and people at risk of catching the virus.
Of the 3,711 passengers on a Diamond Princess cruise ship, 705 were infected with the coronavirus. Some other cruise ships have been unable to dock at ports even if they had no suspected cases onboard.
Carnival, Royal Caribbean, and Norwegian Cruise Line have, as a precautionary measure, banned people from boarding who have been to mainland China, Hong Kong, or Macau. A few major cruise lines were on a 30-day shutdown as of March 13.
Some cruise lines cut salary pay and laid off workers as ways to handle losing profits, the decrease in travel demand, and cruise line shutdowns.
Norwegian Cruise Line, for instance, told its staff that it would temporarily cut their pay by 20%, starting March 30, in response to the outbreak. Royal Caribbean recently laid off contract workers.
Research analysts and economists interviewed by Forbes said they believed that cruise lines will have a hard time making a case of why they deserve a federal bailout compared to other industries that need it.
Goldman Sachs predicted that a cruise line recovery will take years, citing previous dips, such as the Great Recession.
Millions of restaurant workers are predicted to lose their jobs over the next few months.
Restaurants are especially feeling the effects of people being told to stay home.
As a result of the coronavirus, 5 million to 7 million restaurant workers are estimated to lose their jobs and the industry as a whole will lose $225 billion over the next three months, according to projections from The National Restaurant Association.
In New York City, which CNBC has reported to have more than 27,000 eating and drink establishments with 300,000 employees, restaurants and bars are closed to stop the spread. and some have already laid off workers.
New York City restaurateur Danny Meyer laid off 2,000 employees, or 80% of his workforce, on March 18 and is donating his salary to a fund for the employees at his company Union Square Hospitality Group, according to CNBC. The company operates 18 restaurants in the city.
Although a lot of restaurants and eateries are having to think about laying off workers, some major pizza chains, such as Domino's, are looking to hire more than 50,000 new employees during the coronavirus. Some GoFundMe pages have also been set up to help workers during layoffs, and have raised over $60,000 so far.
Manufacturing in the US is now in a state of contraction.
The Wall Street Journal reported that indexes tracking manufacturing activity in the US recorded a steep drop in March, compared to February.
US manufacturing is now in a state of contraction instead of expansion, the product of falling business activity across the economy.
A recent survey from the National Association of Manufacturers found 80% of firms expected they would take a financial hit from efforts to curtail the spread of the virus.
More factories are beginning to stagger shifts in their workplaces in a bid to maintain current production levels, the Journal reported.
