Earlier, we wrote about a possible $7 billion revenue hit to the state budget and reported on a Washington Research Council examination of policy cuts made to the budget in the Great Recession. Today also comes more reports on how the economic downturn is affecting the services sector, small business, and the gig economy.
The U.S. service sector plunged into contraction territory for the first time in a decade last month as the pandemic forced shutdowns and layoffs nationwide.
The Institute for Supply Management said Tuesday that its service-sector index fell to 41.8 in April, compared with a March reading of 52.5.
Any reading below 50 signals that the service sector, where the majority of Americans work, is in a contraction. It was the first time the services index has been in contraction since December 2009 and it was the lowest reading since March of that year with the nation mired in the Great Recession.
The story includes this recognition of a likely prolonged economic hit, with a corresponding affect on tax revenues.
… many economists believe the recession could drag on until a vaccine is widely available.
“Social distancing measures are being gradually lifted, but it will take time to undo the economic damage,” said Oren Klachkin, lead U.S. economist at Oxford Economics. “Significantly weaker demand, supply chain disruptions … and uncertainty over the virus’ trajectory will pose considerable headwinds to an economic rebound.”
Small businesses shed 11 million jobs in April, according to AP.
That report comes from payroll provider ADP, which counted the jobs lost at its business customers with under 500 workers. The smallest companies, those with fewer than 20 workers, cut nearly 3.4 million jobs and those with 20 to 49 employees cut 2.6 million.
The ADP National Employment Report shows a startling drop in private sector employment overall.
Private-sector employment decreased by 20,236,000 from March to April, on a seasonally adjusted basis.
The gig economy has also seen a downturn, with the effects now being felt at HQ.
Uber is cutting 3,700 full-time workers and its CEO will give up his base salary with the nation largely still in lockdown.
The San Francisco company said Wednesday that the layoffs and related costs like severance will reach about $20 million.
Uber Technologies Inc. had already imposed a hiring freeze and has offered up to 14 days of financial assistance to drivers and delivery workers who were diagnosed with COVID-19, or placed in quarantine.
And with travel on hold across the globe, the Wall Street Journal reports Airbnb is cutting 25 percent of its workforce.
Airbnb Inc. said it is slashing 1,900 jobs, or a quarter of its workforce, and cutting investments in noncore operations, as the home-sharing giant predicted the coronavirus pandemic would change its business even after more people start traveling again.
Co-founder and Chief Executive Brian Chesky told employees about the cuts in a memo Tuesday, adding that the company’s revenue forecast for this year is “less than half” of last year’s level.
More indicators that the new normal will not be like the old normal.