From Exxon to Charles Schwab, white-collar job cuts are mounting
Posted October 30, 2020 1:23 p.m. EDT
CNN — The pandemic has wiped out millions of mostly low-income jobs in hotels, restaurants, retail and other hard-hit corners of the economy. Now, the pink slips are spreading to higher-paid office workers.
In the last few days, ExxonMobil, Chevron, Charles Schwab and Raytheon have announced plans to cut thousands of white-collar jobs. That's on top of major layoffs already announced or reported in the press at Wells Fargo, Goldman Sachs, Salesforce, Allstate and CNN owner WarnerMedia.
Corporate America's belt-tightening provides more evidence of the fragile and uneven nature of the economic recovery from the pandemic. Just as laid-off Americans in some parts of the economy are returning to work, others are filing for unemployment.
"This is a secondary impact from the pandemic. And it will slow the recovery as we see more layoffs ripple through different industries," said Gus Faucher, chief economist at PNC.
If it continues, the pink slips hitting office workers could have wide-reaching consequences for the economy, impacting everything from homebuying and shopping to credit card defaults.
"This slow trickle of white-collar layoffs is very impactful because they spend the most," said Danielle DiMartino Booth, CEO and chief strategist at Quill Intelligence.
1,000 jobs cut at Charles Schwab
Some of these recent mass layoffs have more to do with billion-dollar corporate takeovers than the pandemic. For instance, Charles Schwab announced Monday it would cut about 1,000 jobs following its takeover of TD Ameritrade.
"There were so many branch managers let go this week," said John, a branch manager at a TD Ameritrade who found out Tuesday his job was eliminated.
John, who requested that CNN Business not use his real name, is the sole breadwinner in his family and has two children.
"I haven't had to actively look for a job in, I can't even tell you how long. Maybe ever," he said. "This is going to all be different for me. I'm still processing it."
To be sure, the white-collar workers have fared far better during the pandemic than blue-collar workers, who tend to be younger and have less education. Many people who normally work in offices have been able to do their jobs from home, albeit sometimes with the challenge of caring for children home from school. Higher-paid workers also tend to have more savings and assets to fall back on during tough times.
And many companies provide generous separation agreements to people laid off in corporate restructurings. In John's case, he said he and others laid off by Charles Schwab are getting a severance package in addition to paid health insurance for a period of time.
"I have time to figure it out," he said. "But I don't know what to expect in the middle of a pandemic."
'I do feel like it's spreading'
The unusual nature of this recession -- namely that it was started by a health crisis, not an economic one -- caused mass furloughs and layoffs of frontline workers in hotels, restaurants, small businesses and the travel industry.
Nearly 40% of low-income workers lost their jobs in March, according to the Federal Reserve.
Many people were rehired or found jobs elsewhere as the US economy reopened. After peaking at nearly 15% this spring, the unemployment rate has descended steadily, falling to 7.9% in September.
But now there are mounting signs of white-collar job cuts.
The unemployment rate among Americans without a college degree has dropped sharply in recent months, according to the Bureau of Labor Statistics.
But while the unemployment rate among people with some college experience is lower, it ticked higher in September to 8.1%.
"I'm really worried about unemployment," Discover Financial CEO Roger Hochschild told Bloomberg Television in an interview this month. "I do feel like it's spreading more toward white-collared jobs. A lot of companies are reacting to the environment and cutting back."
The layoff moratorium is toast
In another example, Allstate announced in late September that it would lay off 3,800 employees. The insurance giant blamed the job cuts in part on the sharp drop in driving during the pandemic and the refunds given to customers.
The pandemic resulted in "fewer accidents, so you need fewer claims people," Allstate CEO Thomas Wilson told The Wall Street Journal.
ExxonMobil announced Thursday it will cut 1,900 jobs in the United States, mostly at its headquarters in Houston. A broader reorganization by Exxon, whose share price has been cut in half this year, will cause the loss of more than 14,000 jobs by the end of 2022.
Raytheon disclosed this week it will lay off 4,000 contractors, mostly engineers, as well as 1,000 corporate employees. And that's on top of Raytheon's previously announced plans to lay off 15,000 employees because of the downturn in the aviation industry.
This isn't just a private-sector phenomenon.
Layoffs could rise among government workers because the pandemic has set off an epic budget crunch at states and local municipalities. And hopes for a lifeline from Uncle Sam have been dashed by Washington's failure to agree to another round of fiscal stimulus.
At the onset of the pandemic, some companies pledged not to lay off employees. That promise bought them time to assess the situation, and perhaps a bit of good publicity. Clearly, the layoff moratorium is over.
"There was an initial sense that maybe this would last a month and people would be back at the office," said PNC's Faucher. "That obviously has not been borne out and businesses are recognizing this will be with us for a while."
'I didn't see it coming'
In August, Marc Chatow found out through a Zoom call that he was being laid off from his job in the accounting and finance department of Dignity Health, which merged with another healthcare company.
"It just totally came out of the blue. I didn't see it coming," said Chatow, who lives in Phoenix and had been with the company for 11 years.
Chatow received a three-month severance package, but he was worried about how he would find another job, especially at 53 years old. And just a few weeks after being laid off, Chatow's partner was diagnosed with cancer.
After a frustrating two-month search for a new job, Chatow accepted an offer Friday morning at another healthcare company for comparable pay.
"There were days I was depressed and I would get upset," Chatow said. "But you've just got to keep going at it. You might feel like giving up, but tomorrow is a new day."