Tens of thousands of job cuts announced by blue-chip companies in the last 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 U.S. labor market.
In one of the biggest layoff announcements since the pandemic caused widespread economic shutdowns, Walt Disney Co. said Tuesday it’s slashing 28,000 workers in its slumping U.S. resort business.
The fallout isn’t contained to America. Royal Dutch Shell Plc will cut as many as 9,000 jobs as crude’s crash forces billions of dollars in cost savings, while German auto-parts supplier Continental AG’s supervisory board 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 Thursday are estimated to show filings for U.S. 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 U.S. economist at Deutsche Bank Securities Inc. “You’ll see larger companies that may have been on a certain revenue trajectory before the downturn start to reevaluate.”
The latest layoffs stretch beyond hourly workers, who were among the hardest hit at the start of the pandemic in industries such as restaurants and hospitality, to office and managerial positions.
While Shell didn’t provide a full breakdown of the cuts, a spokesperson said that positions in the top three layers of the company would be reduced by one-fifth.
“In many places, we have too many layers in the company: too many levels between me, as the CEO, and the operators and technicians at our locations,” the oil major’s chief, Ben van Beurden, said.
The rout in the oil sector has been so swift and severe that once-sacrosanct corporate positions are being trimmed. Exxon Mobil Corp., which long prided itself on weathering crude-market crashes without resorting to job cuts, shocked investors and analysts in recent months when it targeted as much as 10% of U.S. office staff for layoffs.
Halliburton Co., the world’s largest fracker, is eliminating an entire layer of management, while Marathon Petroleum Corp., the biggest independent U.S. crude refiner, has embarked on its second round of job cuts and is targeting salaried positions at plants in Texas, California and Louisiana.
At Disney, the layoffs impact domestic employees in its theme-park, cruise line and retail businesses. While two-thirds of the workers are part-time, the cuts also involve executives and salaried employees, the company said.
With the pandemic still raging and U.S. lawmakers 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.
The outlook appears to have helped revive stimulus negotiations, with signs Wednesday that the White House and congressional Democrats are making progress. Treasury Secretary Steven Mnuchin told CNBC that he expects to reach a deal with House Speaker Nancy Pelosi and U.S. stocks climbed on the news.
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.
Read More: Next Wave of U.S. Job Cuts Targets Millions of Higher-Paid Workers
Particularly hard-hit are also companies reliant on travel and tourism, including Disney. American Airlines Group Inc. has warned that it could furlough 19,000 employees, while United Airlines Holdings Inc. is planning to cut about 12,000.
There are signs, however, that the labor market is gradually improving in certain areas as demand rises from the depths of the pandemic. U.S. 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.
— With assistance by Laura Hurst, Barbara J Powell, Joe Carroll, David Wethe, and Christopher Palmeri
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