There are some glimpses of economic recovery in West Michigan, but the region has a long way to go as the effects of COVID-19 still loom.
Brian Long, director of Supply Management Research at the Seidman College of Business at Grand Valley State University, released the September economic report from the Institute for Supply Management Survey and it shows a mixed bag of results.
According to the report, the unemployment rate in the state declined to 4.7%, eclipsing August’s rate, which stood at 4.8%. The unemployment rate for Kent County is 4.1% for the month of September.
There was a record-breaking number of job postings. However, individuals are hesitant to return to the workforce. The report cited numerous reasons including concerns that COVID-19 rates will start surging again and unresolved day care issues.
Nevertheless, employers are using different tactics to entice individuals back into the workforce by offering incentives such as higher wages and signing bonuses. As a result, the index of employment is +27, up from +19 in August.
Long said there have been some temporary layoffs because of the struggling automotive industry that have affected manufacturers and employers worldwide. The issue stems from the shortage of computer chips, which is causing frustration among automotive manufacturers, dealers and customers. The computer chip shortage “could last for at least another year or more,” according to the report.
The chip-shortage issue is evident in the third quarter reports from General Motors and Ford, which reported sales were down 33.1% and 27.6%, respectively.
Other companies also suffered declining sales in the quarter, including “Stellantis (Chrysler) declining 18.8%. Among the transplants, American Honda skidded 10.9%, Subaru dropped 16.5%, Nissan fell 10% and Hyundai-Kia eased by 9.1%.” Toyota emerged with a third-quarter gain of 1.4% but still left some of its factories idled, contributing to less-than-stellar September results.
“The entire U.S. auto industry — including the Asian manufacturers, which were doing a bit better than their domestic counterparts until recently — is in an incredibly volatile position right now and we are seeing inflated retail prices across the board,” said Jessica Caldwell, Edmunds’ executive director of insights. “It’s growing extraordinarily hard to predict who will come out on top heading into the rest of the year, as every automaker is at the mercy of its suppliers and challenged logistics around the globe.”
Although the auto industry is suffering some setbacks, the manufacturing industry as a whole continues to thrive in terms of demand, but a labor shortage and threat of continued supply chain disruptions threaten the industry’s short-term outlook. The report revealed the shortage of employees has caused an increase in backlogs of work as orders are left unfilled, yet the “prices charged for those goods leaving the factory gate also surged higher again in September, rising at a rate exceeding anything seen in nearly 15 years of survey history.”
“With COVID-19 cases showing signs of having peaked early both domestically and globally, some of the supply chain and labor shortage issues should start to ease, in turn taking some of the pressure off prices,” said Chris Williamson, chief business economist at IHS Markit, in the report. “But a dip in manufacturers’ expectations for the year ahead to the lowest for four months due to supply worries underscores how production is likely to be adversely affected by shortages for some time to come.”