On a recent episode of the Small Business Edge podcast, I spoke with Chad Moutray, Chief Economist of the National Association of Manufacturers. We discussed manufacturing in the U.S. and around the world, and what business owners can expect for the rest of 2020 and into 2021. Below are excerpts from our conversation.
Brian: What is the state of manufacturing right now in the United States?
Chad: The abrupt stoppage of activity in the US has hit manufacturing hard, not as hard as the service sector obviously, but we've seen manufacturing production fall about 18.5% from February to April.
You see the numbers when you look at sentiment data, when you look at a lot of other figures, so certainly the worst we've seen since the great recession. In some cases, you're seeing numbers that are the worst ever. We just released a survey on the overall outlook. Roughly a third of our members are positive about their company's outlook. The good news is that we are over the worst of it. The rate of decline has slowed down.
Brian: When you talk about a big bounce in Q3 this year, what does that mean when it doesn't get us to where we were in January and February?
Chad: We're starting to see stores reopen around the country, but people will still be hesitant about going out in public. Another thing to keep in mind, we've had 40 million Americans file for unemployment insurance in the last 10 weeks. I think we will still have an unemployment rate of around 10% by year's end. To put that number in perspective, 10% was the worst number we had in the great recession. I believe this will slow down the path to growth.
What is unique about this downturn, is that it hit the service sector harder than other sectors. It hit lower income Americans, minorities, disadvantaged groups, and women harder. Contrast that with the great recession, which typically hit more male dominated sectors like manufacturing and construction.
Brian: Do you think that the disruption in global trade will make companies revisit the idea of domestic supply chains for their products?
Chad: I think we were already seeing companies reevaluating their supply chain before COVID-19, given the trade war and other events over the past few years. U.S. companies were thinking about moving out of China into other pockets of Southeast Asia or Mexico or coming back home. COVID has certainly changed that conversation again.
Brian: Could there be legislation on sourcing certain products and services domestically?
Chad: Well I would definitely encourage you to go to the www.nam.org page. We have content on strengthening the domestic manufacturing supply chain, and a series of proposals on tax incentives. We are advocating for more products to be made in the U.S.
Brian: Do you think that there will be economic or financial incentives or low rates on loans to companies that manufacture their goods domestically?
Chad: NAM is asking for investments in domestic manufacturing to help American manufacturing stay competitive, whether it is tax credits or incentives for a better workforce or innovation. We want these types of investments available to manufacturers.
An example of the type of low-cost business lending that is available to many manufacturing companies is the Federal Reserve Main Street Lending Program, which offers loans to businesses through their banks or participating financial institutions.
The Pitney Bowes Bank, Member FDIC, an authorized participant in the Main Street Lending Program, and its subsidiary Wheeler Financial from Pitney Bowes™, are examples of lenders who are committed to the manufacturing industry and can provide financing options for manufacturing firms during these challenging times.
To listen to the complete podcast with Brian and Chad, click here.