Layoffs deepen as pandemic hits at-risk industries

As the COVID-19 pandemic continues to slow business and market growth, at-risk industries have been forced to layoff more workers in response to growing coronavirus concerns. The Final Round panel breaks down the details.

Video Transcript

MYLES UDLAND: All right, let's turn our attention now to the labor market. Earlier today, we got data from ADP showing that private employers added 749,000 to their payrolls during the month of September. This is good. And we're looking for 859,000 jobs to be added to non-farm payrolls, according to Wall Street estimates, when the jobs report comes out on Friday.

But we continue to kind of monitor the situation, especially as it relates to white-collar employment, and the last 24 to 48 hours have not been great on that front. We've seen Disney announced 28,000 job cuts, and while most of them are concentrated at their parks, 9,000 of them are full-time workers.

Shell announcing that 9,000 jobs will be cut. Dow is getting rid of 6% of its workforce. That's good for about 2,200 jobs. Marathon Petroleum is beginning job cuts. Airlines have tens of thousands of jobs hanging in the balance if they don't get an additional stimulus package. And I think it all comes back to a theme that we've talked about and been concerned about.

And as companies begin to firm up their plans for 2021 budgets, do we need to rightsize? How are we going to keep profitability in line? I think a risk of a second wave of unemployment, especially in the white-collar part of the workforce, the higher earning part of the workforce, becomes a real risk.

And we even heard last night Joe Biden talking about the K-shaped recovery. And Dan Roberts, you and I remember when we would guess at the shape every day, what would the shape look like? And now, I think when Joe Biden is saying K, that's basically consensus.

And on the up, we have workers who went home, kept their jobs, everything is great. On the downside, folks who work at restaurants, hotels, they've really bore the brunt of this crisis. And now it seems, and something that I'm concerned about is that the upper end of that K starts to get a little bit weaker as these kinds of announcements start to add up.

DAN ROBERTS: Well, Joe Biden is saying K, President Trump's still saying V-shaped, which just clearly isn't the case. It's interesting, you know, you mentioned all the companies that are doing layoffs. I'm not sure if you said Disney, which is about to cut 28,000 parks workers.

I think that's a good example, very unfortunate, of course, but a good example of the fact that even certain companies that have reopened stores or reopened whatever part of their business they had to close, Disney being the example here, reopening its park in Florida, reopening the parks abroad, it's still not anywhere close to pre-pandemic levels, barely scratching the surface and beginning to come back. Not because people aren't coming back, but because they're keeping capacity low.

And as a result, parks workers that were furloughed, and we've talked about this for the last few months, right, the fear that people who were furloughed who basically were hoping, OK, eventually, this temporary time will end, and I'll be brought back, are increasingly being called up and told, actually, now you are laid off. Now you're gone. And that was a fear when people said, oh, everything bottomed in May, and we're up, up, up since then and the employment numbers are better since then.

Sure, they're better. But we also saw, I remember in the last report, that the number of full-time jobs went down, or maybe it was the full-time salaried employees being laid off went up. But one of those, kind of, lesser numbers that is less talked about ticked up again. And Disney is an example. I mean, 40,000 parks workers were furloughed, now we talk about 28,000 of them being laid off for good.

It's terrible. And I think it shows that even companies that, you know, on the surface, you might think the worst of it is over, it's still going to be a long time. You mentioned airlines, that's another example of big layoffs potentially coming this week. On Friday, and I wrote up a story about this yesterday, we had on the president of the AHLA, the hotel association.

I found it very interesting when I asked him about the comfort level for people to begin traveling for pleasure. You know, how do you get the message out that the cleanliness is OK and that people can travel for pleasure? And he kind of came back with, that's not the issue. It's not about leisure travel, it's business travel.

And earlier on Friday, we had the representative from the Association of Flight Attendants. She said the exact same thing. The issue isn't people being ready to travel for pleasure, it's business travel. And a number of industries are going to continue to be hammered, even if we think that the overall economic data is improving. They're going to continue to be hammered because there's no business travel.

Hotels, airlines, and restaurants, there's no conferences, there's no summits, there's no in-person business meetings. And so there's no reason for those people to travel. And so whether people feel comfortable yet staying in a hotel or comfortable flying isn't even the issue. Because other than taking a vacation all of a sudden, you've got no reason to do it.

So all this is just a long way of saying, I think you're right. You know, K-shaped and people can cherry pick positive encouraging economic data, and we can look at stocks rebounding, great, great, great. But a lot of industries are nowhere near out of the woods.

MYLES UDLAND: Yeah, and I think, you know, and we just talked to Palantir's COO, they talked about how much less travel they're doing. And that's a business where a lot of their employees are on a plane every week going all over the world and the amount of money that they're spending on airline tickets and hotel nights and meals and all that stuff. That's just not happening anymore.

And we see through the housing market, how this one part of the labor force has continued to thrive, and they're comfortable making large discretionary decisions. And I know that there's a lot of commentary around [INAUDIBLE], it's a lifestyle choice. And yes, it might well be, but when you're taking on a mortgage that could be 200, 400, $800,000, it doesn't really matter what your life choice is.

That's a huge commitment to make in a pinch, and you're only going to make that if you feel comfortable about your employment prospects. And I would just add, if you look at the unemployment rates, leisure and hospitality, unemployment rate, still over 20% during the financial crisis. That peaked at about 14%. So that industry is still far more damaged than it had been.

Business professional services right now, unemployment rate is just under 8%. That peaked at 12% during the financial crisis, and it only peaked at 9% during this crisis. And so I think you could look at it two ways. You could say business and professional services have done far better, or you could say there is a lot more room for business and professional services to enact more layoffs to get towards the level they were at after the financial crisis.

DAN ROBERTS: Well, sure, and everyone loves cutting, right? The shareholders love cutting. So I think they could cut more. I'm really glad you mentioned consulting, so just a quick thought there, consulting is a good example, right? I mean, a business where, at the beginning, at least, most of those workers are traveling all week.

And yet, during this time, the idea of not being able to travel or not having to travel hasn't hurt the firms themselves, for the most part. I know someone at McKinsey, and she was saying, oh, I'm as busy as I've ever been, maybe busier, but all from home. Well, that's, you know, fine and well for the firms themselves. But who suffers the most? The services that those firms use.

So the airlines, the hotels that normally those consultants would be traveling to, the restaurants near, you know, in those business travel cities where they would be eating. All of those subsidiary businesses and, kind of, businesses that facilitate the business travel suffer, even while the firms are going to be just fine.

Bain, McKinsey, Deloitte, they're all going to be just fine, even though those consultants aren't traveling around the country right now, they're offering their services while sitting at home, just like we are.

MYLES UDLAND: Yeah, and I guess the inverse of this, all those companies that are hurt by businesses not operating as normal. I guess we're outlining the bull case for why all these SaaS plays are so great. Because if you're in the sphere of B2B and a business is contracting with you or you are dependent on a business is business, you tend to have a more durable base of consumption than if you are on the consumer-facing side of that exchange.