A second wave of layoffs has already hit in the United States, serving as a warning for Canada as the Canada Emergency Response Benefit (CERB) winds down and the federal government determines the shape of its next phase of support for businesses and workers.
The official U.S. jobs reports in May, June and July are relatively upbeat. But we find that U.S. workers are already undergoing a second wave of coronavirus-related layoffs that is not showing up (yet) in official jobs reports. This aligns with unemployment claims: around 1 million Americans continue to file claims each week. It means that businesses are failing and the economic recovery is weaker than the jobs data suggest.
In a new real-time study that randomly engaged more than 6,000 Americans, more than half of the workers who were laid off in the initial phases of the COVID-19 pandemic, and then rehired, have now been laid off again or have been told by their employers they may be laid off again. Of those rehired, four in 10 are at high risk of being laid off a second time because they are not actually working. They have been put back on payroll as a condition of loan forgiveness under the U.S. government’s Paycheck Protection Program. That program expired Aug. 8.
Each day, we asked a unique set of Americans the same set of questions, and each day we got the same share of the population affected by repeat layoffs and at risk of layoff. Worse, we found that the problem is more severe in states where COVID is not resurgent. So the second COVID surge is not causing this second economic wave, suggesting U.S. economic conditions are only going to get worse.
The latest official jobs reports miss this phenomenon because they ask whether someone is employed, not whether they are actually working. Moreover, the reports reflect job status from three to four weeks ago and are already out of date by the time they’re published.
In short, this means that a substantial portion of the reported U.S. job growth over the spring is not real. Worse, the renewed layoffs appear to reflect overall economic conditions as government support runs out rather than the resurgence of COVID, and imply a much deeper recession than the jobs data indicate.
This “economic second wave” comes at a time when Congress is at a stalemate over a renewed relief package and many programs have now expired or been weakened. It illustrates what happens when government support is not extended, and provides a warning for Canada as it debates the extension and shape of its own relief programs.
Danielle Goldfarb is head of global research at RIWI Corp.
