During the 1930s, while America was in the Great Depression (or perhaps now, the first great depression), one of the things that rescued the country was manufacturing preparations for World War II. While it is true the world is working closer towards a major war, currently the enervation of the US manufacturing base has resulted in the systematic disenfranchisement of millions of people from the work force, with a stratification between the very poor and the very wealthy.
Will domestic war-time manufacturing resume? That is anybody’s guess, but according to the Wall Street Journal there is no manufacturing returning any time soon, for due to the effects of the COVID-19 shutdown is not a mere furlough, but the laying off of workers due to permanent factory closures.
Factory furloughs across the U.S. are becoming permanent closings, a sign of the heavy damage the coronavirus pandemic and shutdowns are exerting on 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 Inc. CAT -2.98%▲ said it is considering closing plants in Germany, boat-and-motorcycle-maker Polaris Inc. PII -1.89%▲ plans to close a plant in Syracuse, Ind., and tire maker Goodyear Tire & Rubber Co. GT -4.64%▲ plans to close a plant in Gadsden, Ala.
Those factory shutdowns will further erode an industrial workforce that has been shrinking as a share of the overall U.S. 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.
The closures suggest that a growing share of the record job losses in recent weeks won’t be temporary, said Gabriel Ehrlich, an economic forecaster at the University of Michigan. The more that job losses turn from temporary to permanent, he said, the harder the hit to consumer spending and every company that relies 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 U.S. manufacturers. Factories added 1.4 million workers from 2010 through 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, the Bureau of Labor Statistics said Friday, including 1.3 million jobs lost in April alone, though this also includes temporary layoffs. (source)
This suggests what I have feared, which is that the current round of furloughs and temporary closures will result in permanent closures leading to more layoffs with no hope of fixing the problem.
If current trends continue, it would not be a surprise if 50% unemployment levels were reached. Hopefully this will not come to pass, but it should not be ruled out.
The country is going to get a lot poorer. Purchase what you can now and pay down debts before it becomes too difficult to find employment.