First-time claims for unemployment in the U.S. shot up by an unprecedented 3 million last week, an expected but still shocking increase that came just as lawmakers put the finishing touches on a $2 trillion rescue plan, the largest in American history.
And the stock market continued its wild swings. The Dow Jones Industrial Average rose 1,351.62 points, or 6.4 percent, on Thursday to 22,552.17 — a huge jump that somehow looks relatively small given the market’s recent roller-coaster ride.
The $2 trillion stimulus, which the Senate passed Wednesday and is expected to clear the House this week, has been helping to prop up the market. The package includes up to $500 billion in loans, loan guarantees and investments to support businesses and states.
For retail in particular, the benefits outlined in the stimulus package go beyond the bailout following the 2008 financial crisis.
Large companies can get temporary relief from troubled debt restructuring, which would allow retailers to renegotiate bank terms without necessarily having a lot of capital on hand, said Steve Odland, president and chief executive officer of The Conference Board Inc., a business research think tank.
For retailers, which are carrying a large amount of inventory due to their store closures, experiencing a precipitous drop in sales, and facing fixed costs including rent, payments owed to vendors and, to varying degrees, employees, this is much-needed help, Odland said.
The bill also ensures there is no requirement for delinquent credit reporting for 120 days, which helps shield companies from being penalized for payment delays during the pandemic. It would help them avoid downgraded credit ratings, which in turn would keep vendors from changing their payment terms from the usual 60 or 90 day terms to the kind of cash-up-front terms that often push retailers over the edge, Odland said.
“They don’t want to trigger bankruptcies, so that gives some space there for retailers,” said Odland, who has also previously been ceo of Office Depot Inc. and AutoZone Inc.
For employees, particularly retail workers who have been laid off as a result of store closures during the pandemic, the stimulus expands unemployment benefits by providing an additional $600 a week of federal pandemic unemployment compensation, according to the bill. But there are still important questions about whether the stimulus measures do enough to encourage retailers to keep workers on the payroll, even if on a temporary furlough, labor experts said.
“The stimulus does great things for unemployment insurance coverage, which is important for retail workers, who tend to be low wage workers, and who are now going to get income replacement at least for a temporary period of time,” said Nari Rhee, director of the retirement security program at the UC Berkeley Center for Labor Research and Education.
“But there is still the big policy question of the importance of actually keeping workers attached to their jobs,” she said, highlighting the lack of affordable health insurance options for workers laid off under these circumstances. (Rhee also raised the need for more concrete measures offering health protections to retail sales, warehouse and distribution workers still having to go into work amid calls for self-isolating.)
What the historic and sudden jump in unemployment — and how long it lasts — is still an open, and scary, question.
Initial claims for unemployment insurance for the week ended Saturday shot up to a seasonally adjusted 3.3 million. The sharp increase follows a jump in jobless claims from the prior week, when 70,000 people applied for unemployment protection.
While reporting the surge, the Labor Department said: “States continued to cite services industries broadly, particularly accommodation and food services. Additional industries heavily cited for the increases included the health care and social assistance, arts, entertainment and recreation, transportation and warehousing, and manufacturing industries.”
Besides the knee-jerk stock market, weekly jobless claims offer perhaps the closest thing to a real-time read on the broad economy, which is usually measured more in months, quarters and years.
So far, most major retailers that have closed their stores — by choice or government mandate to slow the spread of COVID-19 — have kept their workers on the payrolls, presumably with the help of business interruption insurance in many cases.
Some stores such as Walmart, Costco and Target are open and doing a brisk business, at least in essentials like food, but for the companies that remain dark or are operating with only a web site, if at all, job losses are seen as inevitable.
Nordstrom Inc. said late Wednesday that it would require “a smaller workforce to execute on the critical activities of the business during this time. As a result, it will be furloughing a portion of corporate employees starting April 5 for six weeks. Impacted corporate employees will continue to receive enrolled benefits.”
People who are not receiving pay, wanting a job and able to work can generally apply for unemployment.
Before the crisis, the nation’s unemployment rate stood at an extremely low 3.5 percent and is expected to soar dramatically, perhaps to 20 percent or higher by some estimates, as people stay at home.
Perhaps China, where the outbreak started, offers something like hope as it is starting to open back up from quarantine — at least for now.
Tapestry Inc., which operates the Coach, Kate Spade and Stuart Weitzman, said Thursday morning that its stores would stay closed another two weeks in North America and Europe, but that nearly all of its stores in China are reopening and that consumers are “gradually returning.”