WASHINGTON/SAN FRANCISCO (Reuters) – The generous U.S. unemployment benefits rolled out to blunt the economic harm caused by the coronavirus could have an unintended effect: it may actually be an incentive for companies to choose layoffs rather than keep staff on their books.
FILE PHOTO: Treasury Secretary Steven Mnuchin addresses the daily coronavirus response briefing as U.S. President Donald Trump listens at the White House in Washington, U.S., April 2, 2020. REUTERS/Tom Brenner
That’s at odds with a government-backed loan forgiveness program set to launch for small and medium-sized firms that opt against job cuts, so long as the bulk of the money is used to keep staff on at full salary.
The number of Americans filing for unemployment benefits last week shot up to more than 6 million, a record high, Labor Department data on Thursday showed. Millions more are set to claim in the coming weeks as major parts of the United States economy remain shut down until the death toll from the virus shows signs of abating.
The CARES Act passed by Congress a week ago was designed to keep businesses and workers from economic freefall. For workers losing their jobs, an unprecedented expansion in unemployment benefits until the end of July was put in place.
On Friday millions of firms are expected to apply to lenders approved by the Small Business Administration for low-cost loans that the government says will be forgiven if employers keep people on their payroll through the end of June.
But businesses are already grappling with a tricky equation: which route is best for them and their empl