Workforce Management

Cappelli’s Column: Lessons from COVID

Do you remember COVID? Of course you do, but do you remember this part of it: Hearing about the strange virus in China then about what the U.S. was doing to keep it out of here by stopping flights from China. Next, watching it hit Italy very hard and hearing the accounts of not enough respirators, hospitals having to choose who to let die because of those shortages, thinking that Italy must not have very good healthcare but in fact it had some of the best in the world.

Then cases started to appear in the U.S. They were downplayed by the government until epidemiologists got on TV and told us no, this is soon going to hit the entire country. Finally in March 2020, it did, and everything shut down.

Looking back, we could see it coming, relentlessly, although at the time it may not have seemed that way and we did nothing much about it until the virus was actually in our towns.

Is a tariff-driven economic shock looking similar? Not yet, so far it’s just pundits saying the tariffs will create problems. But now the media has given us images to watch it come, and those images are the ships that send finished products and components for U.S. manufacturers leaving Chinese ports to come here. More accurately, the ships not leaving. It takes a month for ships leaving China to get to the U.S., so the ones that set sail before the new 145% tariffs on Chinese exports to the U.S. are still coming in. That’s why it can still appear to us that the tariffs are not real. But cancelled sailings are reported to be 50% by the end of April. That news is like watching COVID hit Italy. The logistics experts are now like the epidemiologists in COVID.

Arrivals in the Port of Los Angeles, the major entry for Chinese goods, are expected this past week to have already fallen by 35% from a year ago. It’s going to get worse every week with smaller shipments, and then even smaller because orders for Chinese factories producing the goods have stopped.

We hear about consumers talking themselves into a downturn. That means if everyone pulls back their buying, demand falls, that leads to lower orders for goods and services, which leads to lower demand for component parts and labor. A shortfall of necessary imports drives prices up for those components, and also cuts into U.S. production, which further drives up prices. We are already seeing consumers buying cars now rather than waiting, for fear that this will happen next month. That means lower car sales next month. Enough of this and poof! We get a recession.

If President Trump calls off the tariffs tomorrow, is this over? I’m terrible at predictions, but my guess is that China and the U.S. will “blink” before driving us completely off the cliff. If so, we will still have months of shortfalls because new orders will have to be placed in China, things have to be made, and then we have the one-month shipping to get them here. Do we remember car prices shooting up even after COVID because the computer chip companies had to restart their operations, then there was a scramble for a diminished supply of chips among all manufacturers, car production slowed. Prices shot up with diminished supply.

OK, what does this have to do with those of us worrying about the workforce and the workplace? We have trigger-happy CFOs who think the goal is to cut in advance of a downturn. UPS, for example, has cut 20,000 jobs expecting a downturn in retail sales and home delivery. Is that sensible? Once again, we should try to take a lesson from COVID. When business picked back up, as it might if the tariffs stop quickly, then those companies that laid off fast will find that their competitors who did not are off to the races scooping up the recovered demand. Those who cut will find themselves scrambling to find workers who were not necessarily sitting around waiting for their old employers to call.

For companies that can’t hang onto workers, the smart alternative is to furlough them. That means putting them on leave of some kind. Their benefits usually continue even if the leave is unpaid, and the key issue is to keep the employment relationship going so that they are ready to start work immediately if demand comes back.

To persuade your trigger-happy colleagues to do that may require walking them back down the memory lane of COVID.

Oh yes, and then we have the tariffs in the rest of the world….

Peter Cappelli
George W. Taylor Professor of Management
Director – Center for Human Resources for the The Wharton School

Tags: May 2025

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