Permanent Layoffs Increase in Orange County

Permanent layoffs are increasing in Orange County. According to a new report from JLL, permanent layoffs have increased from 6% to 9% of the total unemployment market since May in the market. The increase in permanent layoffs is directly related to the permanent closures of businesses after a prolonged shutdown. In total, more than 6,000 workers have permanently lost their jobs.

“This is happening for a couple reasons,” Jared Dienstag, research manager at JLL, tells GlobeSt.com. “There are businesses that temporarily closed down early in the pandemic and laid people off, with the intention of bringing them back to work. However, because COVID-19 remains rampant, some of these businesses were unable to re-open, they then had to permanently lay people off. There are also companies that operated at a lower than normal capacity but have not been able to resume normal operations which has forced them to permanently lay people off. This is different than the Great Recession where the economy endured a heavy volume of permanent layoffs.”

While most of the layoffs are still classified as temporary, it is clear that businesses are feeling the pressure of the shutdown. Longer closures could mean more increases in permanent layoffs. “Once the company is unable to stay afloat, they will start turning temporary layoffs into permanent layoffs,” says Dienstag. “Although there are limited job opportunities, an employee may choose to leave a company while being temporarily laid off. It comes down to how long an employee can continue on unemployment benefits. If the layoff lasts beyond an employee’s unemployment benefits, they will then seek work elsewhere and leave their existing place of work altogether.”

By property type, retail has seen the largest number of layoffs—unsurprisingly—but industrial came in second, which was surprising considering the asset class has been called a beneficiary of the pandemic. “This does surprise people at first glance. We are seeing a dichotomy of the industrial marketplace,” says Dienstag. “On one hand, there is strong demand for warehouse and distribution, especially from the ecommerce sector. On the other hand, manufacturers of non-essential items have witnessed a decline in demand. With many consumers cutting back on their overall spending, while allocating much of their expenditures on essential items, there is less demand for other products and services. Manufacturing and companies working with commercial aerospace have accounted for 58%of the industrial layoffs. Decline in commercial passenger air travel and the manufacturing of non-essential items have led to these layoffs. However, only 1.3%of industrial occupier layoffs are a result of permanent business closures.”

The bulk of the layoffs have already happened. Since May, layoffs have steadily trended down. “We began this analysis in mid-March as the quarantine was starting. In the second half of March, Orange County recorded over 37,000 layoffs to California’s Economic Development Department’s WARN (Worker Adjustment and Retraining Notification) system,” says Dienstag. “This was followed by 21,000 in April, 4,100 in May, 1,100 in June, and just over 1,000 in July. The fact the number of monthly layoffs is trending downward is definitely a step in the right direction. The quicker we are able to control the spread of COVID-19, the sooner more people can safely return to work and resume their daily activities.”