Tag: Suddenly

Container ships stretch far into the Pacific and wait days for their turn to unload goods in California ports. Automakers stop production because they can’t get enough of the computer chips that make a modern car work. Long-dormant restaurants are finally seeing a surge in customer demand, but they can’t find enough chefs.

These are all headlines of the past few days, and they have one thing in common: They show how America’s great economic challenge has turned 180 degrees in a breathtakingly short period of time.

Just a few months ago, the nation was facing a huge shortage of demand for goods and services that threatened to prolong the downturn caused by the pandemic well beyond the point in time when the virus was contained. The central economic problem of 2021 looks like the exact opposite. Businesses are increasingly faced with the challenge of producing adequate supplies of goods and services – whether wood or cold beer – to meet this resurgent demand.

Huge sections of the economy closed last spring and are now being switched back on. However, with roughly three million Americans vaccinated each day and nearly $ 3 trillion in federal funds flowing through the economy, it is an open question how long it will take companies to update themselves. Your collective success or failure will determine whether this is a year of Goldilocks economic conditions or a frustrating mix of price spikes and ongoing shortages.

“The global economy is fragile because it never really recovered,” said Nada Sanders, professor of supply chain management at Northeastern University. “There is massive pent-up consumer demand, but it is important to connect supply and demand because when you have a supply shortage, you don’t have the products that consumers want.”

After major disruptions over the past year, the intricate networks where the big industries hold shelves and services are available have frayed. Many workers have left the workforce. Worldwide manufacturing and shipping were temporarily shut down, followed by reopenings, causing disruptions made worse by random events like the Texas ice storms and the blockade of the Suez Canal.

Semiconductor companies cut production of the chips intended for cars and trucks when major automakers cut production in the early days of the pandemic. The semiconductor companies made the chips needed for popular computers and other home electronics.

The auto industry is now facing the delayed effects of this cut. Ford idled the factory that makes the popular F-150 trucks for two weeks. Overall, IHS Markit analysts are forecasting that one million fewer vehicles will be manufactured in the first quarter of 2021 due to the disruptions. This means that American consumers looking to target their new stimulus checks to a car may have fewer options and little leverage over price.

The labor market has now become a paradox. The unemployment rate is well above prepandemic levels at 6 percent, and the job market is even worse when you include Americans who say they are no longer looking for work. However, many employers, particularly in restaurants and related service industries, describe a labor shortage.

At Bibb Distributing Co., a distributor of Anheuser-Busch and other beers in Macon, Ga., Delivery drivers are so hard to find – and demand for the product is strong enough – that drivers have to work overtime and managers have to use trucks, said Win Stewart, the manager.

Updated

April 11, 2021, 2:45 p.m. ET

“When I talk to other people in the market and try to find out if it’s something we’re doing or if others are experiencing the same thing, all of my conversations are the same,” said Stewart. “We can’t find people.”

That could challenge things if the summer goes as many expect and the economy reopens more widely as most of the people are vaccinated. The 85-strong company already has 10 to 12 vacancies and drivers are routinely offered signing bonuses to move to another location.

“I have a feeling that as they open concert halls and resorts, demand will increase,” said Stewart. “You’re going to see a lot of demand and I’m not sure you have the labor pool to serve them.”

There are different theories for the separation between the data indicating a weak labor market and individual reports of a strong one.

Many prospective workers may be unable or unwilling to take jobs as long as they see health risks from the coronavirus, or they may spend their time looking after children or elderly or disabled family members. Jed Kolko, chief economist at Indeed and an Upshot employee, has calculated that the percentage of working women between the ages of 25 and 54 among mothers has decreased by 4.5 percentage points, compared with 3.4 percentage points for children without children.

This would mean that efforts to restore schools, daycare and nursing homes to full capacity will have important positive effects on the supply potential of the economy – part of the Biden government’s rationale for emphasizing spending on these areas in its pandemic rescue plan.

Another possible reason for the labor shortage is that the influx of federal funds has made some people less motivated to work. Stewart said five or six employees quit in the days after the government mailed $ 1,400 stimulus checks, and company executives have argued that expanded unemployment insurance benefits could deter people from getting back into work.

However, this theory is not supported by research from previous rounds of extended benefits which found that a lack of job opportunities is a bigger factor in unemployment than people receiving unemployment benefits.

The combination of increases in demand and disruptions in supply in the economy also has important global dimensions. Many companies rely on imports, including from countries that lag far behind the US in vaccinating their populations and, in some cases, are facing new outbreaks.

In addition, the securing of container ships in the port of Los Angeles and some other American ports, particularly on the West Coast, shows that the world trading system continued to be weighed down by the whiplash effect of last year’s shutdowns, followed by rising demand.

“There are companies that have changed the way they work before the pandemic and are more digital, and reopening isn’t such a big deal for them,” said James Manyika, a partner at McKinsey Global Institute, the giant consultancy’s internal research arm. “The problem is that this is not the majority of companies, and these other companies will find that they are highly dependent on their ecosystems and their supply chains.”

You can’t turn the world economy off, then turn it back on and expect everything to go back to normal right away, in other words. The question for 2021 is how slowly this reboot is turning out.