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Manufacturers key to economic recovery

June 11, 2020
By: Ellen Marrison

With the nation in the midst of a recession following 128 months of economic expansion, many are asking how we will find our way out. Turning to a long-time strength for the nation and relying on our manufacturing industry is one way. Manufacturing leaders presented some policy solutions and historical context for the outlook during a National Conference of State Legislatures webinar yesterday in conjunction with representatives of the National Institute of Standards and Technology’s Hollings Manufacturing Extension Partnership.

Although not all manufacturing jobs returned after the Great Recession, manufacturing is still one of the most significant roles in states’ economies, said Scott Paul, the president of the Alliance for American Manufacturing. It represents about 12 to 13 percent of GDP, but has an outsize punch for its impact, he said. For instance, manufacturing jobs boast higher wages, generate more economic activity and produce synergies with universities.

The manufacturing sector has started to recover, Paul said, but the recovery has been uneven. Paul maintains that a strong manufacturing recovery will mean better outcomes for the economy as jobs are generated through manufacturing chains, which in turn supports tax collections and state budgets. When looking at fiscal response to the Great Recession, Paul noted that an increase in infrastructure spending had one of the most robust multiplier effects.

“Supply chain resilience and dynamism have never been more important,” Paul said.

A statewide survey of manufacturers in Minnesota captured in real time their reactions to the pandemic and the president’s national emergency declaration on March 13. The survey, which was begun earlier in the month and concluded after the declaration, revealed a decided decline in economic confidence with those interviewed after March 13 expecting a greater decline in gross revenue (23 percent in contrast to 6 percent pre-COVID) and profitability (19 percent post, 8 percent pre-COVID). The number expecting to invest less in capital expenditures nearly doubled, with 26 percent saying they would invest less compared to 14 percent pre-COVID. The survey also revealed that smaller manufacturers expect to take the biggest hit.

As manufacturers began to respond to the coronavirus threat, they learned to coordinate with state agencies and navigate different cultures, rules and programs in terms of their engagement, said Mark Troppe, senior research fellow at the Center for Regional and Economic Competitiveness. Now, as states and manufacturers are grappling with re-openings, there are new challenges to consider. One of those concerns small companies whose owners fall in the baby boomer category and were approaching retirement prior to the pandemic. Troppe said those individuals are now more anxious with concerns for the viability and future of their companies. Keeping those companies in business with different ownership structures could be an opportunity.

Other opportunities exist in supplying personal protective equipment (PPE), and some supply chains may be re-shored, but supply chains are complex and long-standing relationships can’t pivot in the short term unless it makes sense for the long term, Troppe said. Right now, he said, “manufacturers are trying to navigate it all.”

manufacturing, mep, coronavirus