Coronavirus Impact on Business and Engineering

The coronavirus impact on business affected every industry in some way. The effects were even felt on “essential” engineering jobs.

As a power engineer and business owner, I will expound on the rippling effects from COVID-19. While noting, a power engineer was an essential worker in the pandemic.

My experience when COVID-19 shut economies down

I vividly remember the highways feeding the Bay Area in California were empty. Even at rush hour, when normally it’s bumper to bumper traffic.

Just as eerie, many of my clients and subcontractors had gone silent. This rippled through my work, causing high-priority water and power projects to freeze. The disruption among our customers, was generally sourced from the following:

  • Fear: people were fearful for their health and the health of their loved ones
  • General uncertainty: unsure if the situation would worsen and cause further disruption
  • Engineering project funding: uncertainty over project funding
  • Social distancing: impracticalities of 6-feet separation on some project sites

To better grasp the economic impacts from COVID-19, we need to peek into the 2008 Great Recession.

2020 market versus the 2008 Great Recession

In 2008, a deregulated financial market nearly collapsed the entire U.S. economy. The following domino effect unfolded with banks:

  1. Sold mortgage derivatives, without bearing default risks
  2. Pursued the processing of more and more loans
  3. Created interest-only loans, for subprime borrowers with loosened lending
  4. Approved countless underqualified buyers
  5. Watched buyers fall behind on their mortgages, leading to short sales and bankruptcies
  6. Froze credit, due to having a high default rate in their loan portfolios
In the aftermath, the government intervened and prevented another great depression. Yet, many business still went under, as credit dried up with banks on the brink of collapse.

Let’s look at the mayhem using Bureau of Labor Statistics’ data. The U.S. created roughly 670,000 businesses every year in the decade before the 2008 market crash. In 2010, this figure dropped to 560,000.number of businesses started annually in America sourced from US BLS

The below graph from the Bureau of Labor Statistics, shows the spike in business closures. Around 170,000 small businesses closed between December of 2008 and December of 2010.

businesses started and closed in America annually sourced from US BLS

This market turmoil then led to millions of lost jobs. 8.7 million jobs vanished from December of 2007 through December of 2009. Even highly coveted Silicon Valley jobs went up in smoke. These were startups and companies, which were supposedly insulated from market dips.

Essential engineer jobs in the 2008 Great Recession

In non-software related engineering fields, the following unfolded:

  1. Bank lending tightened
  2. High supply of homes flooded the market, with mortgage defaults surging
  3. Housing construction halted, as builders couldn’t secure loans
  4. Engineers couldn’t design for increased demand, and layoffs ensued

Structural, civil, and power engineers typically design for future demand. The ideology is to leverage today’s dollars to build for the future. With the economic contraction though, employers couldn’t afford to pay idle engineers.

2020 coronavirus impact on small businesses

The 2020 economic dip this go around wasn’t sourced from greed. Rather, an unknown virus engulfed the entire world. In the process, the virus exposed major inefficiencies in America’s supply chain.

With America heavily relying on China for essential supplies, supplies in the U.S. dried up. This supply chain disruption propagated unapologetically through every industry.

Then throw in the mandated work from home issuance, and the aftermath becomes clear. Chaos with endless streams of small businesses shutting their doors.

In America, small businesses are the backbone of the economy. They accounted for 64% of the net new jobs created between 1993 and 2011. This according to the US Small Business Administration . To better conceptualize, 64% is 11.8 million of the 18.5 million net new jobs created!

The importance of small business in the American economy

Small businesses accounts for 44% of the total private payroll in America. Not to mention, many fortune 100 companies survive through small businesses. For example, a large part of Google and Facebook ad spending is from small businesses.

As another example, before the pandemic, Yelp had a valuation over $3.5 billion. When the pandemic hit, the share price dropped from an estimated $35 to $17.

Then one step further, small businesses create the future giant companies of tomorrow. Just look at the following select list of small business founders:

  • Henry Ford (Ford)
  • Bill Gates (Microsoft)
  • Sam Walton (Walmart)
  • Steve Jobs (Apple)
  • Larry Page and Sergey Brin (Google)
  • Elon Musk (Space X and Tesla)

These were all once small businesses, which today employ millions of people.

Economic shutdowns cripple small businesses

99.7% of U.S. businesses have fewer than 500 workers according to the Census Bureau. And most small businesses don’t have a vault of saved up cash. Businesses like Google and Apple are outliers with billions of dollars in the bank.

Rather, most small businesses rely on continuous work to stay afloat. It’s like a shark, which needs to constantly move or it’ll die. This is because most businesses exchange hours for dollars. Versus the scalability of selling endless widgets online.

For this reason alone, a sustained unplanned shutdown is business suicide!

Coronavirus impact on essential engineering jobs

To use myself as an example, I don’t physically go out and fix fallen power poles. Rather, I do design and research, which includes the following types of work:

  • Electrically upgrade water or wastewater treatment plants for increased capacity
  • Electrically upgrade filtration equipment to improve water treatment plants
  • Retrofit and upsize substations to meet increased power demand
  • Upgrade old and failed electrical equipment
  • Improve protection and reliability of power systems through relay upgrades

These projects depend on expanding economies. So unless equipment fails, engineers wouldn’t have much to design around.

In the pandemic, cities and counties stopped funding projects. Instead, used their funds to tackle COVID-19. Also, private businesses froze their engineering operations, to save cash due to the uncertainty.

Just think of your own financial situation. If you lose your job, will you try to buy a bigger home and a nicer car? No, unless you’re flush with cash or you’re insane.

So, even essential engineers aren’t immune to pandemics.

Coronavirus impact on business will drive the world in a new direction

Economies are not made to sit still with credit lines frozen. The outcome can be catastrophic, affecting everyone including engineers.

As an optimist though, I do see the coronavirus’ bringing positive change. The following once adopted, I believe will help curb future potential economic issues:

  • Return of manufacturing jobs to America, especially for essential supplies
  • Improved medical screening for travel and immigration
  • Improved virus outbreak protocols
  • Increased medical research funding for vaccines and medical treatments

What’s now undeniable today, is our economy is extremely fragile. More so than we ever thought. So we need to better prepare, if say we’re hit with a powerful coronal mass ejection.

Do you think business operations have forever changed because of the coronavirus? How do you think global governments should handle future virus outbreaks? 

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