Walmart and Amazon to Add New Jobs and Boost Pay, But Unemployment Surge Looms

St. Louis Fed President says unemployment could hit 30%, while analysts warn Thursday's jobless claims may reach 2.5 million.
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Amazon  (AMZN) - Get Report and Walmart  (WMT) - Get Report, the world's two largest retailers, will boost pay and increase warehouse staffing amid a surge in consumer demand, but analysts are warning that a wave of jobless claims is on the horizon as coronavirus lockdowns shutter businesses and factories around the country.

Walmart will increase the hourly wage it pays warehouse workers by around $2, to between $15 and $19 per hour, and plans to hire an additional 150,000 staff over the next 10 weeks to meet demand. It's also reaching out to workers who have lost their jobs in the hotel and restaurant sector with offers of immediate positions in delivery and fulfillment centers.

Amazon, meanwhile, said warehouse workers will get double pay once overtime exceeds 40 hours, after earlier hiking its minimum wage to between $15 and $17 per hour, and revealed plans to add 100,000 new workers in the coming weeks.

"We believe that both companies are well positioned to take meaningful long-term market share given ongoing investments in both e-commerce as well as physical stores," said KeyBanc Capital Markets analyst Edward Yruma. "While both companies have not adjusted financial guidance, we believe that recent news and our ongoing channel checks bode well for near-term earnings."

Walmart shares were marked 2.4% lower in pre-market trading Monday to indicate an opening bell price of $111.20 each, down 13.2% from the all-time high of $128.08 it reached last Thursday. Amazon, meanwhile, was marked 1.41% lower at $1,819.99 each.

The new job additions, however, are unlikely to make a dent in the overall spike expected in new applications for unemployment benefits  this week, with analysts forecasting an increase of as many as 2.5 million as one in three Americans is asked to stay at home to prevent further coronavirus infections.

St. Louis Federal Reserve President James Bullard, in fact, cautioned over the weekend that U.S. unemployment could hit 30% in the coming months, with the broader economy taking a $2.5 trillion hit, as businesses around the country shutter amid travel restrictions, lockdowns and shelter-in-place orders brought on by the coronavirus pandemic. 

Senate lawmakers are debating a $2 trillion stimulus bill to cushion at least a part of that hit, with checks that could be worth as much as $3,000 sent to vast majority of American households if its passed this week, but others argue it might not be enough.

"Even aggressive, rapid stimulus won't prevent an horrific employment report for April," said Ian Shepherdson of Pantheon Macroeconomics. " A 7.5 million drop in payrolls—the middle of our guesstimated range—would lift unemployment to 8% in a single month, reversing the entire decline of the past eight years."

"This is not cyclical creative destruction; it's just destruction, and only government action can limit the disaster," he added