Manufacturing companies are starting to see more job losses
A lot of states are experiencing tremendous job loss due to the economic shutdown. In the beginning, most of these job losses were concentrated in the service industry. But other sectors of the economy are starting to be impacted too. A good example is a manufacturing sector.
Manufacturing has been hurt by both loss of business and the high level of uncertainty surrounding the lockdowns. And new evidence indicates that manufacturing companies are temporarily cutting employment for sustainability or permanently cutting their workforce.
The shutdown in Minnesota is now in its fourth week and has been extended up until May 4th with the possibility of some changes. In the beginning, businesses in the service industry were at a bigger risk of job loss. This is because the nature of the service industry requires a high level of personal contact.
But now manufacturing companies are facing their own issues. For one, manufacturing companies are not getting orders for their products. Secondly, the uncertainty surrounding the Coronavirus has increased risk making it hard to plan or invest.
As a result, Minnesota Manufacturing companies are now laying off employees at higher and increasing rates.
A sign-maker in Brooklyn Park permanently laid off 178 employees. An optical-glass company mothballed a factory in Faribault. Polaris shut down plants worldwide, including in Minnesota, Iowa and Wisconsin.
For the week ending April 4th, the data is showing large increases in unemployment benefit claims in industries outside of the service industry.
Manufacturing unemployment claims, for instance, have grown over 100% for the week ending April 4th, while sectors like food service have seen a drop in the number of people applying for unemployment benefits. While overall total job losses are significantly higher in service industries, the new trend is likely to persist with extended shutdowns.
More than half of manufacturers surveyed across Montana, North Dakota, South Dakota, Minnesota, Wisconsin and the Upper Peninsula of Michigan told the Minneapolis Fed in mid-March they planned to cut workers over the next six months. Another 20% said they didn’t know.
Clearly, the impact of the lockdowns on the economy will be extensive.