Unemployment is Trending Toward Historic Highs. How Will Manufacturing Fare?
United States unemployment levels were at historic lows in 2019. Now, just a few months into 2020, they’re trending toward dangerous highs, the likes of which haven’t been seen since the Great Depression. COVID-19 is to blame for the mass shutdowns, layoffs, and furloughs. With no end in sight, the number of jobless continues to rise. Today, it stands at 30 million — roughly one in six capable workers is unemployed. Estimates project the jobless rate will breach 20% by the end of April, nearing the 25% levels of the 1930s.
Manufacturing has consistently struggled with employment levels over the last decade. According to the latest Manufacturing ISM® Report On Business®, the industry currently faces significant challenges with keeping people employed. The report concludes that manufacturing employment is at its lowest level since 1949.
Will manufacturing rebound?
As unemployment nears 20%, analysts are looking ahead to understand broader implications for the economy. Consumer spending power is depressed to near-historic levels, which has a direct impact on production output. It’s speculated that even after state and local economies begin opening up, manufacturing will lag.
With consumer spending power depressed, there’s less demand for manufactured goods. Even if factories do reopen without restrictions, the incentive to re-employ a full staff may not exist. As a result, manufacturing will continue to shed jobs as other sectors of the economy gain them back. It’s the consequence producers face as the first step in the product supply chain — they’re at the mercy of consumer demand.
Manufacturing’s slump pre-dates COVID-19, and there was speculation of manufacturing recession before the pandemic hit. The ballast was employment rate, which consistently weighed against manufacturers. Demand for qualified workers won’t be as high as it was pre-COVID-19, but the skills gap will be even larger.
History tells us what to expect
With numbers similar to the 1920s and 30s, there’s evidence of a slight manufacturing rebound under the right conditions. Some analysts believe April’s figures will be the peak of unemployment and that a surge of re-employment will follow. This may kickstart the economy quickly, leading to resumed operations for many manufacturers that will ramp back up over the course of the remaining year.
While a quick upswing would be the best scenario for producers, the more likely one is a laggard approach. Manufacturing may very well have to deal with its pre-COVID-19 recession markers before it can recapture its skilled workforce. This likely means consolidation. Smaller manufacturers will shutter or fold into larger entities, which means consolidating talent. Automation also plays a role.
Ultimately, the future of manufacturing employment will look much different than it does today. Consolidation and automation make for fewer total jobs, yet we may very well see more of those jobs filled by qualified professionals looking to return to their trade after time spent furloughed. Manufacturing continues to change and with it, so will opportunities for employment.