Midwest manufacturing employment, including in Minnesota, plunged to the lowest level since 1993 in April because of the economic downturn caused by the coronavirus.
The nine-state Creighton University Mid-America Business Conditions Index — in which a reading below 50 signals contraction — crashed to a worrisome 35.1 from 46.7 in March, according to the report released Friday.
Half of surveyed supply managers reported that vendors had halted business, while another third reported shipping problems related to the pandemic.
Minnesota’s index sank to 34.8 in April from 45.5 in March as new orders, sales, employment, imports and inventory levels slumped to indexes of just 19 to 26 points.
Nationally, manufacturing activity in April fell to an 11-year low, with the Institute for Supply Management’s index dropping to 41.5 from 49.1 in March. That was the lowest level since April 2009, just a few months before the Great Recession ended.
The manufacturing sector accounts for 11% of the U.S. economy.
Ernie Goss, director of Creighton’s Economic Forecasting Group, said he expects regional factory conditions to worsen.
“This is a consumer-led recession with manufacturing lagging. As a result, I expect the manufacturing to worsen in the next month,” Goss said.
April marked the second consecutive month of dismal results for Minnesota and the eight other Mid-America states: Iowa, the Dakotas, Kansas, Nebraska, Missouri, Oklahoma and Arkansas.
Even with the huge downturn, Goss acknowledged that many manufacturers were deemed “essential” and allowed to stay open, so the sector was not as hard-hit as retail or restaurants.
Some factories are starting to reopen, such as those making Winnebago recreational vehicles. However, in recent months, Minnesota companies from Tennant to Andersen Windows and Doors and Starkey Hearing have shut production lines or furloughed workers as the downturn hit.
Last month, U.S. Steel, ArcelorMittal and Cleveland Cliffs announced they would idle their ore mines and pelletizing plants in Minnesota’s Iron Range in the northeast part of the state. About 1,500 workers combined will be affected at Keetac, Hibbing Taconite and Northshore Mining.
This week the St. Paul-based detergent and sanitizer chemicals firm Ecolab said it expected economic conditions to continue to worsen during the April through June second quarter as hotels, restaurants and factory customers wrestled with the coronavirus. CEO Doug Baker told analysts Tuesday that he does not expect a recovery until the second half of the year.
The Creighton survey identified widespread concerns across the sector from halted imports to changes in supply lines that prioritize other customers over them.
Economists polled by Reuters had forecast the national ISM index falling to 36.9 in April. The smaller-than-expected drop in the ISM index was because the survey’s measure of supplier deliveries surged to a reading of 76 last month from 65 in March.
A lengthening in suppliers’ delivery times is normally associated with a strong economy and increased customer demand, which would be a positive contribution. But in this case, slower supplier deliveries indicate supply shortages related to the coronavirus pandemic and not stronger demand.
The report came in the wake of news on Wednesday that the economy suffered its sharpest contraction since the Great Recession in the first quarter, ending the longest expansion in U.S. history. The economy is being pressured by nationwide lockdowns to slow the spread of COVID-19, the respiratory illness caused by the virus.
At least 30.3 million Americans have filed for unemployment benefits since mid-March. Economists said the economy fell into a recession in the last two weeks of March, when states and local governments ordered nonessential workers to stay at home.
Includes reporting by Reuters.