Manufacturing in North Carolina may be among the sectors of the state economy that is hit hard by the coronavirus pandemic.
At the moment, no significant layoffs in manufacturing have been reported across the state, but the outbreak poses a threat to producers who depend on an expanding economy.
Economist Michael Walden of N.C. State University said that a recession is likely upon us and will impact output and employment in manufacturing, along with tourism and other key sectors of the economy.
In all, manufacturing industries account for $100 billion annually, or nearly 21% of North Carolina’s total output, and over 10% of the state’s employment, according to Walden.
“Although it has declined in relative size, manufacturing is still a key part of the economy and has a bigger economic footprint here relative to other states,” he said.
Since the 1990s, manufacturing employment in North Carolina has declined from a peak of 809,000 workers to its current level of 478,000. While employment has increased slightly since the Great Recession, shrinking employment in manufacturing over time is mostly a result of automation, Walden said.
Among the biggest components of the state’s manufacturing sector are motor vehicle parts, pharmaceuticals and medicine, and high-tech goods.
According to the National Association of Manufacturers, a Washington, D.C., trade organization, some employers were struggling to fill openings because of the technical sophistication of jobs in advanced manufacturing. As a result, even during the pandemic manufacturers may be reluctant to let go of workers.
However, if the outbreak worsens, a potentially steep decline in consumer confidence may lead, for instance, to a downturn in the demand for vehicles and impact the supply of vehicle parts produced in the state, such as components produced in the Charlotte metro region.
In the past, manufacturing in North Carolina was typically rural, such as textiles and apparel factories, or concentrated in specific regions of the state, such as the tobacco and furniture industries historically were.
Not only has the type of goods produced changed over time, but it’s also shifted geographically and become more focused in metro areas, including the production of automobile parts in the Charlotte area.
According to the Charlotte Regional Business Alliance, 16,500 people work in high-value automotive manufacturing in the Charlotte region. Among the largest employers is Daimler, which has over 2,000 employees at plants in Rowan and Gaston counties and York County, S.C.
“That means that downsizing due to the coronavirus will be felt in broader metropolitan areas of North Carolina,” Walden said.
Social distancing and manufacturing
During a press conference Thursday afternoon, Gov. Roy Cooper addressed concerns about manufacturing in North Carolina in light of measures like social distancing that have been put in place to combat the pandemic.
Cooper said he was asking factories to stagger shifts as much as possible.
Where workers could do some tasks from home, they should be allowed to do so, he said. But Cooper said he knows that some work has to continue at the plants.
He encouraged manufacturers whose plants are operating to do as much as possible to protect their workers.
Cooper also described a massive spike in statewide unemployment claims due to people displaced during the pandemic from all economic sectors.
In one day, he said, the state had received more than 18,000 claims for a system that was designed to handle a peak of about 3,000. The Employment Security Commission is adding more staff and making computer modifications in order to serve this growing need, the governor said.
Some of the normal requirements for unemployment benefits, such as in-person interview and seeking another job, are being loosened during the current situation, Cooper said. The state recognizes that many North Carolina employers want their temporarily displaced workers back once the crisis recedes and would be harmed if these employees were forced to seek other jobs in the interim.
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Rural areas not immune to downturns
While much of the economic pressure from a downturn in manufacturing may fall on urban areas, rural areas are not immune. In addition to factories in smaller towns, many North Carolina residents commute from rural areas to manufacturing jobs in metro regions.
“If you are living in, say, rural Chatham County and commute to the Triangle, you earn your salary in the city but spend at home,” Walden said. “This will have an impact on those areas.”
At the moment, however, his focus is on what type of support will be provided by the state and federal government, such as extending unemployment benefits or lump sum payments to households.
While relief to families is critical, small and large manufacturing businesses will need access to low- or zero-interest loans to stay afloat, Walden said.
“The federal government should play a strong role to mitigate the impact of the virus so people don’t suffer and businesses don’t go bankrupt,” he said.
While there is plenty of uncertainty regarding the virus, there is a ray of hope. Walden told CPP that North Carolina is heading into an economic contraction in very strong shape. Walden publishes the NCSU Index of North Carolina Leading Economic Indicators, a monthly economic index that forecasts the direction of the state’s economy. The last measurement, for January, demonstrated a strong economic upturn in January.
“There will be a lot of pent-up demand among consumers,” he said. “When we come out of this, which we will, we’ll see a surge in spending going into the fall.”
Editor’s note: Carolina Public Press Managing Editor Frank Taylor also contributed to this article.
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