You didn’t have to be a fortune teller or an economist to know that unemployment claims were going to spike. News of job cuts and work reductions was coming almost as fast as updates on the COVID-19 spread. One look at pictures of the deserted and boarded up storefronts on Congress Avenue in Austin or similar scenes from the downtowns of other cities, and you knew that Texas was bracing for a significant wave of joblessness.
Sure enough, when the numbers rolled in Thursday, they were jaw-dropping. Almost 156,000 Texans filed for unemployment, representing almost a tenfold increase over the previous week. But those are just the claims that the Texas Workforce Commission was able to process. The commission’s website and its call centers have been overrun, and many callers desperate for help are getting only busy signals.
Ed Serna, the agency’s executive director, in a Facebook Live discussion Wednesday, said 800,000 people have been trying to claim benefits. Last Sunday alone, the commission was hit with 100,000 calls. (Serna said the TWC is hiring additional call center staff and boosting server capacity to handle the wave of claims, now at about 30,000 a day. “Everyone who needs help will get help,” he said.)
Based on that volume, combined with the almost half million Texans who, according to the U.S. Bureau of Labor Statistics, were unemployed in February, the jobless rate could reach around 9 percent (last month’s jobless rate was 3.5 percent). You’d have to go back to the height of the oil bust in the eighties for the last time Texas had so many people out of work.
The state has less than six months of reserves for paying unemployment insurance, the Houston Chronicle reported—half as much as federal guidelines recommend. As the claims mounted last week, Governor Greg Abbott requested an advance from the feds—in the form of interest-free loans—to meet the surge in claims.
But even that doesn’t tell the whole story. Scott Osborn didn’t file for unemployment, but his career is just as much in limbo because of the coronavirus outbreak as those speed-dialing the Workforce Commission. Osborn, 29, accepted a job with a big consulting firm in February and was assured that the offer was solid enough that he could quit his old job.
As February gave way to March, he stayed in constant contact with his new employer, getting reassurances that everything was on track. Then the firm’s president decided to freeze all hiring because of the coronavirus outbreak until at least April 15. On Friday, Osborn got a call saying the job offer was canceled.
Osborn moved in with his parents in Dallas, doing some freelance social media work to bring in some money, and negotiating to defer his car payment and insurance. “It’s a little bit terrifying,” he says. “Basically, I’m doing whatever I can to pay the bills.”
Others may not be so lucky. Osborn’s story is a reminder that as staggering as the surge in unemployment claims is, they mask the much deeper financial fallout that has yet to fully hit the state. From retail to real estate to manufacturing, the response to the pandemic has led to locked doors and thousands of workers decamping to their dining rooms with laptops. Workers who still have jobs worry how long they’ll keep them.
In the energy business, which remains the biggest driver of the state’s economy, companies were already struggling before the outbreak, facing the prospect of budget cuts, layoffs, and in some cases even bankruptcy. Now, even workers who hold onto their jobs could face reduced paychecks. Halliburton, one of the biggest oilfield services provider, furloughed 3,500 employees, meaning they’ll only work every other week for the next sixty days. That’s a 50 percent pay cut. Occidental Petroleum, the biggest operator in the Permian Basin, cut salaries for all its U.S. employees by 30 percent, according to the Wall Street Journal. (CEO Vicki Hollub, who orchestrated last year’s ill-timed and, critics argue, overpriced $37 billion acquisition of Anadarko Petroleum, is taking an 81 percent pay cut.)
For the energy industry, the pandemic has slashed oil demand—gasoline is selling at four-year lows, but no one’s driving—while a price war between Saudi Arabia and Russia has pushed the price of West Texas crude below $22 a barrel.
But the pandemic is devastating the employment landscape across all industries. Landry’s Inc., the restaurant and casino operator owned by billionaire Tilman Fertitta, has laid off 40,000 workers and last week Houston-based Group 1 Automotive, one of the nation’s largest owners of car dealerships, said it was laying off 5,800. In Austin, the cancellation of South by Southwest forced the layoffs of several employees and Circuit of the Americas said it laid off half its staff because of events that were either canceled or postponed.
Economists consider jobless claims a key economic indicator. Under normal circumstances, the unemployment rate is a reflection of the economy’s strength. But Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston, said it’s important to remember that the recent surge in unemployment claims is driven by a deliberate response to the COVID-19 pandemic, and not a reflection of the economy overall.
“The economic costs of the shutdown are quite high—the federal government is spending $2 trillion just to start,” he said. If the spread of the virus is slowed and the mortality rate is sharply reduced, then it will be worth it, and most sectors of the economy should recover quickly. “At worst, after the crazy numbers come and go, I would expect to see the U.S. to be in a mild to moderate recession,” he said. “Texas typically moves through those recessions more easily than the rest of the country because of its diverse economic base, lower taxes, less regulation, and favorable housing prices.”
Energy, of course, may have a longer road back if oil prices remain low. Even before the pandemic and the price war, the industry faced sagging stock prices as investors soured on the shale boom and growing concerns about climate change dampened the public’s perception of fossil fuels.
For other industries, though, the road back to normal remains unclear. With no idea when storefronts or offices will reopen, businesses don’t know what to tell workers, and workers don’t know how long they can hold out. For Scott Osborn and the thousands of others facing either unemployment or smaller paychecks, even a quick recovery still seems a long way off.