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Coronavirus Layoffs, Economic Impact: Four Waves of Job Cuts Predicted


The coronavirus (COVID-19) outbreak and its impact on the economy will likely trigger four waves of layoffs, according to Challenger, Gray & Christmas, Inc., an employee outplacement and executive coaching firm.

For channel partners and MSPs, customer layoffs could ultimately impact monthly and annual recurring revenues (MRR and ARR) — especially those based in per-seat monthly fees based on end-customer headcounts, ChannelE2E notes.

Still, Challenger warns employers against making knee-jerk cuts, especially since re-hiring talent in a snap-back economy can prove extremely challenging, expensive and time-consuming.

Coronavirus: Four Stages of Staff Layoffs

Despite that caveat, Challenger foresees four likely stages of layoffs that include...

  • Wave One - Supply Chain Issues will likely involve companies affected by the supply chain. The challenge started when Chinese factories shut down shortly before the Lunar New Year on January 25, 2020 to slow the spread of Covid-19, Challenger notes. By February 2020, two million shipping containers were idle -- a record, according to Alphaliner. That is half a million more containers than were idled during the height of the financial crisis in 2009, Challenger notes.
  • Wave Two - Industries at Ground Zero including cruise ships, international tourism, hotels, conferences, and airlines, which are experiencing so-called Demand Shock. According to the trade organization Airlines for America, the downturn in demand could cost airlines between $63 and $113 billion in lost revenue this year, Challenger notes
  • Wave Three -- In-person Services and Manufacturing Jobs at restaurants, retailers, and entertainment venues where customers stop shopping, as well as manufacturers, bus drivers, and schools where workers refuse to come in due to outbreak fears, Challenger predits.
  • Wave Four -- Recession-Related Layoffs. 

Coronavirus and Job Cuts: Proceed Carefully -- If At All

Still, the firm warns that companies need to think carefully before making any staff cuts. "No company wants to make quick decisions about cutting workers, especially if employers find that the Coronavirus is really a Y2K-type crisis. They may be unable to bring back their laid-off talent that were so hard to find in the first place," said Challenger.

Y2K -- or Year 2000 -- involved a mad-dash scramble to fix software code ahead of the shift from 1999 to 2000. The code issue triggered concerns about potential nuclear factory issues and other doomsday scenarios. But Y2K concerns quickly faded and there were no major IT issues when clocks, software, hardware and operational technology systems shifted from 1999 to 2000.

Around the same time, the dot-com bubble burst and triggered mass layoffs in certain areas of the IT market -- but the cloud services providers like Salesforce and Amazon rose from those ashes.

Coronavirus and Small Business Loans

Amid the economic concerns outlined above, the U.S. federal government, along with state and local governments, are taking steps to assist businesses.

For instance, President Trump on March 6, 2020 sign an $8 billion emergency funding package bill into law. In addition to funding emergency health care efforts, the package will boost Small Business Administration (SBA) loans and lending programs to support U.S. small businesses impacted by the coronavirus (COVID-19) outbreak.

Alto, the White House is preparing a temporary extension of business sick leave another benefits for employees across all industries, Bloomberg  Radio reports.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.