Manufacturing Growth Stalls Due to COVID-19.

• Author: Sonora, Robert
• Position: THE STATE OF MANUFACTURING IN MONTANA

The United States entered a recession on March 1, 2020. The recession was caused by the need to close the economy as the impacts of the COVID-19 pandemic began to ripple through the global economy. The pandemic brought an end the longest economic expansion in U.S. post-WWII economic history, lasting 10 1/2 years. COVID-19 and policy responses, both from an economic and health perspective, will lead to considerable uncertainty for some time to come.

Economic data for the second quarter of 2020 was dire. First quarter real GDP in 2020 fell 1.3%. Real GDP in the second quarter of 2020 was 9% or in annualized terms -31.4%. The third quarter of 2020 saw a resurgence of growth, 33.1%. But that is still 2.2% below the first quarter level of output.

Current forecasts for the U.S. economy show the rebound to continue. According to The Conference Board's forecast, the annualized 2020Q4 growth will be 2.2% and their baseline forecast for 2021 is 3.4% real GDP growth. They predict the U.S. economy to recover to pre-recession levels by late 2021, but do not foresee the U.S. economy returning to its prerecession trend in 2021. Nevertheless, the most recent IHS Markit U.S. Manufacturing Purchasing Managers' Index (PMI) augured an improvement for the manufacturing sector. However, employment is not keeping pace with expectations and supply chain delays and input shortages are likely to be a drag on the sector.

The impact on U.S. manufacturing has been considerable having already felt the impacts of an ongoing tariff war. Estimates have put the cost to the U.S. economy in the hundreds of billions of dollars per year. The effects of the COVID-19 pandemic have only worsened the economic environment. In March, the National Association of Manufacturers conducted a brief survey of the impacts of COVID-19 on the industry. The survey found:

* 35.5% face supply chain disruptions;

* Over 53% of manufacturing firms anticipate a change in their operations in the coming months;

* 78.3% say that uncertainty associated with COVID-19 will likely have a negative financial impact; and

* Roughly half of respondents stated their business has an emergency response plan.

Manufacturing in Montana

Manufacturing in Montana has remained a stable economic sector for the past decade. Between 2010 and 2019 manufacturing, as a share of total Montana employment, had risen slightly from 3.9% to 4.5% to 20,972. Similarly, manufacturing's labor income as a share of total rose from 4.8% to...