There is much economic uncertainty today, both in the paperboard packaging industry and the United States as a whole. From business owners to employees and their families, many are unsure about the lasting effects that the COVID-19 pandemic will have on our economy and lives.
One of our recent virtual events featured renowned economist and Emory University professor, Jeff Rosensweig, who discussed current trends and speculations for our industry as a whole. While there are more promising details than not, the number one takeaway is to expect a slow return to normal.
Below is a recap of Jeff’s presentation:
Outlooks are Better Than Expected
There is no denying that unemployment rates are at unprecedented highs. However, several variables have combined to inflate these numbers to higher than expected levels, and more than they would be when unprovoked.
Many people lost their jobs when businesses were deemed unessential. While this caused a large spike in the number of people who receive unemployment compensation, it is not the only culprit. New classes of workers who could not previously apply – such as gig economy employees and self-employed business owners – were approved to receive unemployment compensation.
While it may be a pessimistic view, unemployment compensation renewals may be due to the increased value of unemployment insurance benefits. Before the pandemic, our states averaged $400/week per person listed on unemployment with no additional assistance from the federal government. Now, the federal government is offering $600 per week in unemployment compensation on top of the $400 from each state, raising the average to $1,000 per week. This source of income may disincentivize people to quickly return to work, even if they are able.
With these factors in mind, the unemployment rate and the leap in people receiving unemployment compensation are higher than they would normally be, meaning that the economy may be more structurally sound than the headlines portray.
But Progress Will Be Slow
Although the rise in the unemployment rate and in unemployment compensation claims are largely due to federal intervention, do not expect the economy to recover as quickly as it deteriorated. There is rife uncertainty, and consequently within the last two months the volatility index hit levels not seen since 2008. Analysts and business operators are having difficulty projecting future economic conditions. Indeed, this uncertainty is causing large, volatile swings in the stock market.
This uncertain climate leads to a contraction in consumer spending. Even when they return to their jobs and are receiving regular sources of income, consumers will be less inclined to make big purchases. They will be recuperating from losses incurred during the pandemic or stung by the uncertainty and opt to save a higher percentage of their income to cover potential future problems.
Of course, recovery can only begin once the COVID-19 pandemic is contained. The economy will not begin to heal in full until the virus is no longer hanging over our heads. Therefore, a lot of the timeframes will be informed by medical research and the discovery of a vaccine or treatment.
In the end, Jeff Rosensweig believes that our economy will return to normal two years after this pandemic.
How to Make the Most Out of This Time
As we make slow progress through this difficult period, there are efforts you can take to keep your business successful in the paperboard packaging industry.
Keep Employees Safe and Healthy
As boxmakers and paperboard manufacturers, we are essential businesses whose work supports our nation and people. With necessity comes responsibility. Our production floors need to stay open and require people to operate and manage them.
With this in mind, we must take precautions to protect our teams. Increased sanitation practices and distancing between workers can decrease the likelihood of getting sick. This will keep your teams safe, productive, and able to continue meeting the requirements of our industry.
Focus on Upcoming Trends – E-commerce
With fewer consumers leaving the house for groceries, supplies, meals, and other necessities, e-commerce sales have jumped. Platforms like Amazon, DoorDash, and grocery store apps have all seen increased usage since stay-at-home advisories began. Is this a one-time change for e-commerce or will it be the new norm? Older people and other populations who are now use e-commerce for the first time may continue to do so even during the “next normal.”
It’s a good time to focus on improving our processes and products to account for the increased likelihood of virtual purchases. How can we make it more convenient for buyers and distributors while increasing interest in design and function in an online space?
Utilize Sustainable Practices
With distributors’ needs for products and hospitals’ needs for resources and protective equipment, it may be tempting to focus on an “ends justify the means” mentality. Some packaging professionals may focus on delivering single-use equipment while the current need exists.
However, the paperboard packaging industry looks beyond right now towards what will be best for everyone long-term. Despite what’s going on in the world, sustainable practices are still as important as ever. By focusing on maintaining these policies, even while in difficult times, you will save on any losses brought about by the transition post-COVID. After all, our environment still needs protection, and we all have a part to play in this.
By adopting and promoting these practices, we are protecting the earth while saving on resources and production costs.
Turn to PPC for Help
Navigating the uncharted waters is difficult for everyone, but it can be easier with a little help from experts and your peers. Stay engaged with all of PPC’s upcoming speaker events, town hall meetings, and other virtual opportunities.