FNB Economist: Pandemic Fallout Could Bring Jobs Back to US
NILES, Ohio – Faults in the international supply weaknesses exposed by the coronavirus pandemic could lead reshoring by U.S. companies, a First National Bank economist said Thursday.
At the Youngstown/Warren Regional Chamber’s Economic Forecast Breakfast, Ahmed El Nokali said the reshoring issue is key to answering a major question: “Will this coronavirus crisis change our economy structurally or is this temporary?” he said.
El Nokali is FNB’s managing director and head of interest rate management, capital market.
In January and February, the spread of COVID-19 in China showed that American supply chains, while efficient, are vulnerable, he said. That has prompted companies to begin reshoring parts of their supply chain to the United Stated or commit to doing so.
“The main beneficiaries will be middle America and the southern states. That’s where these companies have said they plan to move, and this is across industries,” he added.
That isn’t a “slam dunk,” he added. On the flip side, China has a fully developed ecosystem to house these supply chains, so companies need to balance vulnerability and cost efficiency.
“This year has proven that supply chain diversity and vulnerability is a problem and people are trying to address it,” he said.
The pandemic and the actions taken in response to it plunged the economy into a brief but severe recession, with some sectors performing better than others. Industrial production rebounded more swiftly than during the 2008 recession partially because social distancing is easier than in retail settings, El Nokali said.
Segments of the economy that are historically sensitive to interest rates – such as housing and auto sales – “performed exceptionally well and have shown to be very resilient and a bulwark for economic strength,” he said.
Retail and other customer-facing industries have suffered more greatly, with job losses in the millions. At peak, 22 million were unemployed because of the pandemic, with about half of those jobs reclaimed so far. Among El Nokali’s chief concerns, he said, is the number of permanent job losses.
“An economy fundamentally is the number of people in a country and how productive they are, so when we have people falling out of the labor force it is a worrying trend,” he said.
Consumers now are spending more on goods than they did prior to the pandemic, but net spending compared to February is down because of lower spending on services. Spending in the lower income demographic has recovered but middle income and higher income spending is lagging.
“Part of it has to do with confidence,” he said, noting that according to one survey, 55% of people are still reluctant to go out. Whether spending will generate enough demand to bring more people back to work and encourage a more sustainable economic recovery remains “the trillion-dollar question, literally,” he said.
Despite the pandemic, the Regional Chamber’s economic development staff worked with companies on 10 projects that resulted in more than $2.3 billion in local investment, said Sarah Boyarko, the chamber’s chief operating officer and senior vice president, economic development. Those projects include the Ultium Cells battery plant being developed by General Motors and LG Chem in Lordstown.
The chamber also is working on pending investments totaling $1.4 billion that are expected to be announced in the next 12 to 24 months.
“Even with the many challenges created by COVID, the regional chamber’s economic development team had one of its best years,” Boyarko said. “The incoming leads haven’t slowed down and our staff hasn’t skipped a beat.”
During the program, the chamber, partnering with the Manufacturing Advocacy & Growth Network, or Magnet, presented the fourth annual Excellence in Manufacturing Award to Panelmatic Building Solutions in Brookfield Township.
The division of Panelmatic Inc., which opened last year to support customer demand for modular, prefabricated electrical, has become FirstEnergy’s most significant supplier for packaged substations, said Darlyn McDermott, market leader and growth adviser, southern region, in a video.
“We’ve had a very successful year. We turned a profit our first year out, which is unheard of for one of our new facility expansions,” said general manager Dan Vodhanel general manager.
Oil and gas used to be the company’s primary business segment, but diversifying into electric utilities “worked out very well for us,” he said. Contracts being negotiated for electrical transmission distribution customers would more than double the division’s current business, he said.
The forecast breakfast was the inaugural public event for the Eastwood Event Centre. A ceremonial ribbon cutting was held for the event center, which is attached to the Eastwood Mall and the headquarters of the Cafaro Co., which operates the mall complex and the event center.
The space has removable walls so it can accommodate events and meetings of anywhere from 20 people to nearly 1,000, said Anthony Cafaro Jr., co-president of the Cafaro Co.
“This has been a facility that has been in the planning for over a decade,” he said. “It is extremely gratifying to reinvest in our community, to reinvest in the Mahoning Valley.”
Pictured: Ahmed El Nokali, First National Bank’s managing director and head of interest rate management, capital market, speaks at the Youngstown/Warren Regional Chamber’s Economic Forecast Breakfast.
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