US service workers face a grim winter as more job cuts loom

Economists fear that low-wage service workers face a devastating winter as the latest surge of Covid-19 shutdowns keep shoppers and diners home once again.

As more states move to shut down or limit crowds in shopping centres, restaurants and gyms, workers in retail and food service industries are positioned to repeat the mass job cuts in the spring, according to Daniel Zhao, chief economist at jobs site Glassdoor.

After many states allowed indoor businesses to resume operations during the summer months, some are now moving to limit gatherings as hospitalisations hover at record highs across the country.

Starting Monday, indoor dining will be banned in New York City, governor Andrew Cuomo announced on Friday. California governor Gavin Newsom has limited restaurants in several regions to pick up and delivery, restricted capacity in retailers and asked residents to remain in their homes “as much as possible.”

Pennsylvania banned indoor dining for three weeks starting Saturday, while Delaware announced capacity limits and a 10pm curfew on its bars and restaurants.

“When you look at the holistic picture, it does appear that the recovery is slowing dramatically as we head into the winter,” Mr Zhao said.

Signs of trouble appeared in early November as hiring across the labour market slowed sharply, the US labour department reported last week. Retail trade lost jobs overall, even after figures were adjusted to account for seasonal lay-offs.

Last week, initial applications for US jobless claims rose nearly 20 per cent to 853,000 after a lull during Thanksgiving, to hit the highest level since mid-September.

The data “is the first really overt sign that we’re moving in the wrong direction,” AnnElizabeth Konkel, an economist at job site Indeed, said.

November hiring in food preparation and service was 15 per cent below its level at the same time in 2019, Ms Konkel said. By the first week in December, hiring had fallen to 18 per cent below 2019 levels.

“We’re already starting to see slippage in the food service sector and I attribute that to winter, the rising virus cases and just consumers being really concerned about being out and about whether that’s outdoor dining, hospitality, or going to retail stores,” Ms Konkel said.

The latest jobless claims report showed how widespread the spike in unemployment claims is, with 47 states reporting upticks. It has also spread beyond the traditional labour market.

Applications for Pandemic Unemployment Assistance, a programme that provides benefits for self-employed and gig workers who do not qualify for conventional unemployment benefits, spiked as well, increasing to 427,609 from 288,234 the week before.

Many of those workers could find themselves in financial crises after that programme expires after Christmas, Ms Konkel said.

The dismal report compounds pressure on Congress to address the unemployment crisis. The White House has proposed a $916bn stimulus package including one-time $600 cheques for each taxpayer while slashing funding for extended federal unemployment benefits — a provision that many Democrats say is necessary. Lawmakers have yet to reach an agreement.

Mr Zhao and Ms Konkel said they did not believe an approved and widely distributed vaccine alone would be enough to halt the unemployment crisis. 

“We know that the vaccine offers a light at the end of the tunnel in the summer and it’s just important that congressional action is able to help get Americans past the next few months,” Mr Zhao said. “It’s about making sure that Americans have the money to feed their kids and stay in housing through the winter.”

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