In recovery mode: manufacturers try to bounce back after COVID-19 disruptions
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ORIGINAL ARTICLE
In recovery mode: manufacturers try to bounce back after COVID‑19 disruptions Chad Moutray1
© National Association for Business Economics 2020
Abstract Manufacturers experienced significant disruptions in their operations and demand in 2020, as businesses struggled to cope with COVID-19 and its implications. To control the spread of the virus, governments initiated stay-at-home orders, and many firms were forced to close or limit operations. As a result, there were severe declines in production and employment, both in the United States and in global markets, often at record paces or rivaling the decreases seen in the Great Recession. While activity has started to rebound somewhat in this latest downturn, it will take time for output and hiring to return to pre-recessionary levels—perhaps not until at least 2022—with uncertainties in the outlook pervasive. Keywords Manufacturing · Economic outlook · COVID-19 · Workforce · Disruptive technologies The economic landscape changed suddenly and dramatically due to the COVID-19 pandemic. US manufacturers had entered 2020 with a sense that the sector was stabilizing following weaknesses in 2019. The signing of the United States–Mexico–Canada Agreement and the “phase one” deal with China provided much-needed trade certainty for businesses. And after serving as a drag on growth for three straight quarters, signs that nonresidential fixed investment might rebound somewhat in the first quarter helped increase optimism (National Association of Manufacturers 2020b). Most importantly, at the year’s start, fears of a recession, which were pervasive in the summer of 2019, abated almost entirely, with the Federal Reserve’s three rate cuts in 2019 doing their job to keep the economy growing, or so we thought. Assessments began to change in late January and early February, with COVID-19 cases surfacing in China and then moving elsewhere. Almost immediately, manufacturing business leaders cited challenges, both in terms of demand and in obtaining raw materials and other inputs to production processes. Then, as the virus spread more widely in the United States in early March, these concerns and negative impacts became even more pervasive and exacerbated. * Chad Moutray [email protected] 1
National Association of Manufacturers (NAM), Washington, DC, USA
In a special survey conducted around that time, 35.5% of respondents said that they were facing supply chain disruptions and more than 78% noted that they expected the outbreak would negative impact their finances (National Association of Manufacturers 2020a). In hindsight, we now know that these responses underestimated the economic damage that would result from COVID-19. US manufacturing production declined 20.2% between February and April, and the sector lost 1,363,000 workers over that time frame, many temporarily furloughed due to shutdowns and reduced operations.1 And, while the unemployment rate peaked at 14.7% in April, the reality was even starker, with the “real” unemployment rate—which adds in those “ma
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