Job cuts by U.S. companies surged in July, complicating pandemic recovery

WASHINGTON, Aug 6 (Reuters) - U.S. employers announced another 262,649 job cuts in July as the COVID-19 pandemic continued to weigh on demand, the latest indication that the labor market recovery is losing steam.

The layoffs reported by global outplacement firm Challenger, Gray & Christmas on Thursday were up 54% from June.

The job cuts, the third-largest monthly total since the coronavirus pandemic began, followed data this week showing a big step-down in private payrolls in July and further contraction in employment at manufacturing and services industries.

Hiring announcements totaled 246,507 in July, almost matching layoffs, Challenger, Gray reported.

(Yahoo Finance/David Foster)
(Yahoo Finance/David Foster)

"The downturn is far from over, especially as COVID cases rise around the country," said Andrew Challenger, senior vice president at Challenger, Gray. "Consumers are buying fewer goods and services, businesses are closing, and bankruptcies are rising."

July's job cuts brought the total so far this year to 1.848 million, up 212% from the same period in 2019. The year-to-date layoffs are just 109,180 away from the record 1.957 million job cuts announced in 2001.

The weak labor market data raises the risk of a sharper slowdown in job growth in July. The Labor Department will publish its closely watched, and broader, monthly employment report on Friday. According to a Reuters survey of economists, nonfarm payrolls likely increased by 1.6 million in July, down from the record 4.8 million jobs created in June.

According to Challenger, Gray & Christmas, COVID-19 was cited as the reason for 63,517 job cuts in July. The respiratory illness has been blamed for 1.075 million layoffs so far this year. The balance of job cuts in July were attributed to market conditions, a downturn in demand and bankruptcies.

Several retailers including J.C. Penney and Lord & Taylor have filed for bankruptcy since March. Job cuts remained concentrated at bars, restaurants, hotels and amusement parks. The automotive sector cut 83,853 jobs. Hiring announcements totaled 246,507 in July, almost matching layoffs.

"It is clear that many job losses are now permanent, and it will be challenging for many workers to find new jobs and feel safe taking jobs that are public-facing," said Challenger. (Reporting by Lucia Mutikani; Editing by Leslie Adler)