Job losses in manufacturing show breadth of downturn in Minnesota

A sign-maker in Brooklyn Park permanently laid off 178 employees. An optical-glass company mothballed a factory in Faribault. Polaris shut down plants worldwide, including in Minnesota, Iowa and Wisconsin.

Layoffs at companies that make things in Minnesota are a clear sign that the commercial pause brought on by the coronavirus has rapidly evolved from a temporary service industry shutdown to a comprehensive economic downturn.

"It's definitely beginning to spill over to affect manufacturing," said Mark Wright, the research director at the Federal Reserve Bank of Minneapolis. "More people are losing jobs in manufacturing, construction and mining as weeks go on."

Code Welding, a shop that makes metal frames for factory equipment, has shut down its second shift and laid off five of its 25 workers.

The firm is running, but owner Steve Johnson said he feels like a "hockey goalie," making decisions moment-by-moment.

"We're still seeing requests for quotes, but we're not getting the orders," Johnson said. "Our customers — their customers aren't probably giving them orders."

Through March 28, nearly 16,000 Minnesotans who work in manufacturing had filed for unemployment, according to data from the Minnesota Department of Employment and Economic Development.

The numbers are more than a week old in a fast-moving crisis — roughly another 100,000 people in all industries in the state filed for jobless benefits last week.

But the data illustrate the breadth of a downturn that economists project will lead to at least a 30% decline in U.S. economic output in the second quarter and an unemployment rate well over 10%.

In the last recession in 2008 and 2009, the state of Minnesota lost about 141,000 jobs. The state has now more than doubled that in less than a month.

About one-third of the state's job losses through March 28 came at restaurants, bars, food service, hotels and retail. But those were just the first dominoes to fall, and the job cuts have accelerated in other sectors since.

"What we usually see anytime there's a recession is that consumers cut back more heavily on durable goods," the Minneapolis Fed's Wright said. "Automobiles, televisions, refrigerators and washing machines — those are things that people will typically defer to the future when their income is back to normal."

Wright said manufacturers are generally better-equipped for temporary shutdowns than some other companies. They already do it when they change over a production line or have to fix a key machine.

"There's much more experience with temporary layoffs in those industries than there are at restaurants," Wright said. "As long as firms are still in existence and they're planning on hiring the workers back, then I'm not nearly as worried."

The uncertainty is destructive, though.

More than half of manufacturers surveyed across Montana, North Dakota, South Dakota, Minnesota, Wisconsin and the Upper Peninsula of Michigan told the Minneapolis Fed in mid-March they planned to cut workers over the next six months. Another 20% said they didn't know.

The anonymized survey responses — 60% of respondents run businesses with 50 employees or less — showed the powerful reach of the downturn even three weeks ago. Layoffs at Polaris may grab headlines, but the businesses that supply a giant firm like Polaris, and the businesses that supply those suppliers, are hit too.

Phrases like "uncharted waters" and "screeching halt" appear in the responses, but also "wait and see" and the word "uncertainty," over and over.

A second survey from the Minneapolis Fed, which should shed more light on the state of manufacturing in the Upper Midwest, will be released later this week.

Minnesota manufacturers have some built-in advantages, because parts of the medical device and medical device packaging supply chain are busy right now, said Bob Kill, CEO of Enterprise Minnesota, a consulting firm that worked with 189 Minnesota manufacturers last year.

Firms that make parts for recreational vehicles or aircraft are getting hit harder.

Across manufacturing, firms are much more committed to keeping their workers today than they were going into the 2008 recession, Kill said, and are applying for loans through the federal Payroll Protection Program. Many small production companies have specially trained employees who are difficult to replace.

"We've been through a period of knowing how precious the workforce is, because it's been so hard to find workers," Kill said. "People are seen as very, very, very valuable now."

Johnson said he's doing what he can to keep Code Welding's workers employed, and he is encouraging them to stay home if they're sick or need to care for a family member, but he can't say what the next few months will hold.

"There's so much focus on the disease itself and the numbers," he said. "But it is also vitally important that we still have a platform from which we are able to build things and don't have to start from scratch."

Adam Belz • 612-673-4405 Twitter: @adambelz