Fears rise as temporary US job losses become permanent

Factory furloughs in the US are becoming permanent closings, a sign of the heavy damage the pandemic is doing to the economy.

Factory furloughs across the US are becoming permanent closings, a sign of the heavy damage the coronavirus pandemic and shutdowns are doing to the industrial economy.

Makers of dishware in North Carolina, furniture foam in Oregon and cutting boards in Michigan are among the companies closing factories in recent weeks.

Caterpillar is considering closing plants in Germany, boat and motorcycle maker Polaris plans to close a plant in Indiana, and tyre maker Goodyear plans to close a plant in Alabama.

Those factory shutdowns will further erode an industrial workforce that has been shrinking as a share of the overall US economy for decades.

While manufacturing output last year surpassed a previous peak from 2007, factory employment never returned to levels reached before the financial crisis.

Michigan Maple Block Co furloughed most of its 56 workers at its plant when the state implemented a stay-at-home order on March 24. A month later, the manufacturer of cutting boards and table tops told employees the plant would close for good.

The closures suggested that a growing share of the record job losses in recent weeks wouldn’t be temporary, said Gabriel Ehrlich, an economic forecaster at the University of Michigan.

The more that job losses turned from temporary to permanent, he said, the harder the hit to consumer spending and every company that relied on it — including manufacturers.

“The higher the proportion of permanent layoffs, the worse the chances of a strong recovery start to look,” Mr Ehrlich said.

Layoffs have already wiped away nearly a decade of employment gains at US manufacturers. Factories added 1.4 million workers from 2010 through to the end of last year, employing a total of 12.9 million people in December.

The manufacturing workforce has since dropped to 11.5 million, including 1.3 million jobs lost in April alone, though this also includes temporary layoffs.

Manufacturers in recent years have pushed up output faster than they have expanded payrolls, in part by investing in automation. Since the pandemic took hold, capital investment by manufacturers has cratered.

Robert Atkinson, president of the Information Technology and Innovation Foundation, a Washington, DC, technology-research think tank, said companies that hadn’t invested in more efficient plants would struggle to keep operating them profitably while demand was down. “Manufacturing is becoming a stagnant sector,” he said.

Layoff notices from states across the country indicate a rise in permanent factory closures in recent weeks.

In one, Blue Bell Mattress Co said it was closing its plant in Michigan, after losing its only two customers within several weeks.

First, furniture chain Art Van Furniture filed for bankruptcy in early March. Weeks later, Connecticut-based chain Bob’s Discount Furniture cancelled orders and closed its warehouses to new deliveries because it had closed its stores during the crisis.

The Wall Street Journal