Manufacturing firms in New York state were more optimistic in June that business conditions would be better in six months, according to the latest Empire State Manufacturing Survey from the Federal Reserve Bank of New York. The index for future business conditions rose between May and June by 27.4 points to 56.5, its highest level in more than a decade, according to the Fed. While the industry has not recovered all of the losses from the past two months, these survey results strongly suggest that manufacturing activity is stabilizing following the market disruptions created by the COVID-19 pandemic.
After record contractions over the past two months, the survey’s general business conditions index improved 48.3 points in June to -0.2 (a reading close to zero indicates steadying conditions). The new orders index rose 42 points to a level close to zero, indicating that the quantity of orders was unchanged from last month. Shipments climbed 42 points to 3.3, indicating a slight rise, while delivery times and inventories both held firm.
The index for number of employees was little changed at -3.5, pointing to a second consecutive month of slight employment declines. This should come as no surprise as net hiring in April in the U.S. manufacturing sector was -401,000, and the number of open manufacturing jobs has decreased from around 408,000 in January to 311,000 in April. Therefore, it is clear the COVID-19 pandemic has dramatically altered the manufacturing labor market.
While the most recent data indicates that manufacturing activity is slowly coming back online, battered local economies, weak export markets, record unemployment and reduced capital spending pose significant headwinds in the near-term. As more and more businesses continue to reopen, management is focused on detailed operational issues and processes to ensure compliance and safety for employees and customers, while looking to mitigate the risk of outbreaks.
Businesses will also focus on reducing costs and finding additional sources of revenue, and should be expediting their digital journeys to drive this change. Organizations must continue to rethink processes and strategy for operations and workforce dynamics, and implement agile practices that could continue as longer-term solutions even after the pandemic has ended.