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First Cut: Challenger report for May has second highest one-month level after April’s surge

The Challenger report on layoff intentions for May showed the level eased 40.8% to 397,016 after 671,129 in April. However, the April and May numbers are still the largest two single months’ intentions in the series. The level was up 577.8% compared to 58,577 in May 2019. For 2020 to-date, the number of layoffs announced was a staggering 1,414,828 million.

It is important to remember that layoff intentions announced do not necessarily translate into actual job cuts, although that should not be discounted at present as businesses find themselves unable to make current payrolls and/or make plans in case of a second wave of COVID-19 infections make another round of quarantines necessary. However, layoff intentions can also encompass eliminating open but unfilled jobs, plans to reduce payrolls that never come to fruition due to changing economic conditions, and/or voluntary severance.

The ongoing COVID-19 pandemic and steps taken to contain its spread continued to have its deepest impact on public-facing businesses. May saw another month of massive layoffs in entertainment/leisure (163,680, or 41.2% of the total). The retail contraction accelerated with store closures due to the pandemic and added another large number to that sector in May (37,089, or 9.3% of the total). Services were broadly affected and also had a sizeable increase in layoff intentions in May (34,229 or 8.6% of the total).

Among the reasons cited for planned job cuts in May, overwhelmingly it was attributed to COVID-19 (209,147, or 52.7% of the total). Other large shares of the reasons can be closely associated with the impact of the pandemic and the consequent loss of economic activity. Market conditions were widely given as a reason (119,018, or 30.0% of the total), as well as demand downturn (50,172, or 12.6% of the total).

Hiring intentions were not absent in May and reflected a flicker of hope of a return in activity for some of the hardest hit sectors as a result of the pandemic. There were 38,981 announced intentions in May, of which entertainment/leisure comprised the majority (30,000, or 81.1% of the total. The second largest hiring intentions were in telecommunications (3,730) which may reflect plans to continue or even expand work-from-home arrangements. Also planning to hire were retailers (2,000) possibly to enhance shop-from-home options which have proven a lifeline for some stores during the crisis and which consumers may have grown to like.

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