CHICAGO/NEW YORK (Reuters) – A Florida toymaker plans layoffs. A Wisconsin construction gear manufacturer has frozen hiring. And a California cosmetics company has idled some production, leaving 20 temporary workers with no paycheck.
The culprit for each is coronavirus.
The government’s closely watched monthly payrolls report, out Friday, showed a big upsurge in hiring by American businesses in February, and, notably, no visible effects from the spread of coronavirus.
But economists and officials say the survey behind the report was conducted too early in the month, before the outbreak reached U.S. shores. They expect a drag on jobs growth in the months ahead, and the concern was grave enough among policymakers at the U.S. Federal Reserve that they were motivated to cut interest rates this week in their first emergency action since the financial crisis more than a decade ago.
Anecdotes of the chill on businesses are already starting to accumulate, even before it is showing up in the official data.
In Florida, toy manufacturer Basic Fun, which sells to retailers such as Walmart (WMT.N), Target (TGT.N) and Amazon (AMZN.O), has plans to cut its operating budget by as much as 15%, which will result in layoffs for at least 10% of its workforce, Chief Executive Jay Foreman told Reuters.
The company manufactures all of the toys at factories owned by its vendors in China, where the outbreak originated earlier this winter. But its supplies since the outbreak have been cut off.
The toymaker had brought in excess merchandise in December and January to avoid the proposed increases in U.S. tariffs on Chinese goods, but the inventory is set to run out in April.
Foreman says he is “losing a lot of sleep” as there is no clarity when the factories in China would be fully up and running and how the outbreak will impact overall consumer demand.
“If I was losing two hours a night on the tariffs, I am losing three hours a night on coronavirus,” Foreman said. “We have to watch our bottomline this year. This is going to be a challenging year.”
Wisconsin-based Putzmeister America, which makes machines for pumping, distributing and placing concrete, has frozen new hiring and cut travel expenditure.
Like Basic Fun, Putzmeister’s supply chain links back to China and Chief Executive Jonathan Dawley said the company has not been able to get key components.
He expects a $5 million sales hit from the outbreak.
At Oren Ezra’s small cosmetics factory in Sylmar, California, just outside Los Angeles, the disruptions in China have cut supplies of ingredients used to make sunblock and other skincare products as well as the distinctive packaging produced there.
Ezra’s company, Formology Lab, was about to start filling a big order for a customer who was launching a new line when the crisis hit. He had to put the brakes on it as he waits for supplies to start flowing again. The plant operates two production lines, which each require 20 workers – but the laborers work on an as-needed basis. When they’re not working, they’re not paid.
“For this project, 20 people have already lost a week of work,” he said. “And that’s only one project. We’re not sure what will happen with a few others we’re doing.”
(Graphic: Layoff announcements – here)
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