Jobs

Most Americans who lost jobs describe layoffs as temporary, but research indicates otherwise

Key Points
  • Nearly 8 in 10 unemployed Americans believe their layoffs are temporary, but new research suggests that may not be the case for many people.
  • The University of Chicago's Becker Friedman Institute predicts that 42%, or 11.6 million, of all jobs lost through April 25 due to the coronavirus will become permanent.
  • "The current crisis may be so severe that the fraction of temporary layoffs that become permanent ends up being much larger," economist Jose Maria Barrero told CNBC.
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Workers consider layoffs temporary, but research suggests otherwise

While 78% of unemployed Americans described themselves as temporarily laid off in the government's April jobs report, new research suggests for many people that may not be the case.

The University of Chicago's Becker Friedman Institute predicts that 42%, or 11.6 million, of all jobs lost through April 25 due to the coronavirus will become permanent. In a paper study this month, it used a combination of historical experience and survey data for the findings.

"The current crisis may be so severe that the fraction of temporary layoffs that become permanent ends up being much larger than the historical evidence would suggest," co-author Jose Maria Barrero cautioned in an email.

The Labor Department's April employment report showed a historic loss of 20.5 million nonfarm payrolls and the nation's unemployment rate soaring to 14.7%. Both numbers easily smashed post-World War II era records. In a small consolation, they weren't quite as bad as economists had expected.

According to the study, the jobs most at risk of being eliminated permanently include those lost due to demand shifts and those at companies that don't survive the coronavirus-related closures.

"I would anticipate many bars and sit-down restaurants will not survive the pandemic as people avoid gathering in large groups. So many waiting and bar-tending jobs are likely to disappear permanently," said Barrero, an economist. "This is likely more of an issue for small, independent restaurants and bars than for large national chains."

In fact, many restaurants may have already closed their doors for good.

According to a National Restaurant Association survey in late March, 3% of restaurant owners or operators reported closing permanently and 11% had anticipated doing the same within a month, meaning as many as 100,000 restaurants could close permanently due to coronavirus. There are more than 1 million restaurant locations in the U.S., according to the association.

The hospitality industry is also at increased risk of permanent job losses.

MGM Resorts recently informed employees that while it had hoped to reopen this summer it appeared less likely. In a note shared with CNBC, acting CEO Bill Hornbuckle expressed uncertainty about when workers would be called back.

"When we first furloughed our employees, we hoped the spread of the virus could be contained or that an effective treatment would emerge quickly. We hoped that a significant portion of our operations would bounce back by the summer," he said. "Based on the current situation, we now believe that some of our colleagues may not return to work this year. And, given the continued uncertainty facing our industry, we simply don't know just how many employees will return to work within the coming months."

The Becker Friedman study found that for every 10 layoffs caused by pandemic, three jobs were created in the near term.

Companies such as Amazon, Walmart, Lowe's, Dollar General, Papa John's and Domino's have announced plans to hire more workers as stay-at-home orders shift consumer behavior.

Barrero suggested this "reallocation shock" may result in "a major transformation of the economy, with many types of jobs and industries effectively disappearing and others expanding in a major way."

— CNBC's Jodi Gralnick contributed to this report. CNBC wants to hear about your job experience during the pandemic. Email us at unemploymenttips@cnbc.com to share your story.

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