In fact, the three major problems of tight supply chain, inflation and labor shortage are exploding and promoting each other in the United States, and the world resonates with them to varying degrees.
Christmas shopping season is coming. It is predicted that under the epidemic, Americans' consumer demand for goods rather than services will continue to be strong. Novel coronavirus pneumonia is a new economy that is being transformed into a "shortage economy" before the outbreak of the new pneumonia outbreak.
Prices soared
You may not think that many Americans like to eat soybeans. In Costco supermarkets all over the United States, the 6-pound bags of peas with shells in the freezer have always been popular. The peas in the freezer are divided into 12 small bags, which is very convenient to eat. The Tang people send Acacia with red beans, and they can't return home during the epidemic. Boiled peas in salt water, just two mouthfuls of ice beer, which can solve some nostalgia.
When I first arrived in Houston, I searched Costco for soybeans and found that the production place was still China. I was putting them on the shopping cart. Suddenly, a white woman in her 30s exclaimed, "Crazy". Seeing me look at her, I angrily pointed to a large bag of mixed frozen berries next to soybeans and said that this bag used to sell for only $9.9, but now it sells for $14.99, "crazy." She couldn't stand the difference of $5 and walked away angrily. Her favorite food is now too expensive and her face is full of unhappiness.
Shawn, a Thai repairman who came to the United States with his parents when he was six months old, came to the apartment to repair the screen window. The size of the screen to be replaced is about 70cm × 70cm. Shane said that before the epidemic, he charged a total of $85 for materials and labor. Now he wants to charge $125. "The prices of everything have increased, and there are no bargains anymore.".
Indeed, the prices of almost all goods and services in the United States are rising, and transportation and storage costs are rising rapidly. The latest consumer price index shows that compared with 2020, the prices of grain and baked goods in the United States have increased by about 2.7%, and the prices of meat, poultry, fish and eggs have increased by 10.5%. With thanksgiving approaching, an industry report by Wells Fargo Bank said that the price of Turkey in late September has been higher than that in 2020 It rose nearly a quarter last year, nearly half higher than the average price five years ago. It is expected that Turkey prices may hit an all-time high on Thanksgiving.
The prices of various commodities are also soaring. Steel prices have risen for 15 consecutive months, and oil prices have recently risen to a 13 year high. The national average price of unleaded gasoline per gallon is $1.25 higher than a year ago, and the price of natural gas is about three times that of last year.
According to an article in USA today, Americans' heating bills are expected to soar this winter, which may usher in the "most expensive" winter in decades.
Many commodity price increases are due to unimaginable bottlenecks, such as:
Wineries on the East and west coasts of the United States are worried about the shortage of wine bottles. The glass price of wine bottles is now three times as high as usual;
Canned beer and drinks are becoming more and more expensive because of the shortage of aluminum for canning;
Port congestion is not only due to the lack of dock workers and truck drivers, but also the lack of chassis vehicles for moving containers;
Car manufacturers cut production due to lack of microchips, and the price of used cars soared;
The price of solar panels also rose for the first time in many years due to the reduction of metal supply and higher price of polysilicon, a superconducting material;
The tight supply and high prices of herbicides and other pesticides and fertilizers may affect the planting of soybean, corn and other crops and grain prices in the Midwest of the United States next year.
Bloomberg reported that the U.S. inflation rate has exceeded the comfort zone of monetary policy makers. Many people in the industry believe that U.S. inflation is more intense and lasting than expected. Some economists expect that inflation will continue to distort economic behavior next year.
Labor shortage
Another "blowout" phenomenon is labor shortage.
From Washington to Houston, two kinds of small advertisements are very common. One is the billboard for house rental, especially office rental. The other is recruitment. Recruitment notices are posted at the gates of many restaurants and supermarkets. More than 1500 flights in the United States were cancelled in the last weekend of October. The main reason for airlines is that there are not enough flight attendants. Minnesota Truck Transportation Association It is estimated that there is a shortage of about 60000 truck drivers in the United States due to early retirement and the cancellation of driving school courses under the epidemic.
A few months ago, due to the shortage of cashiers, some whole food supermarkets in the Greater Washington area (whole foods) is changed to customer self-service checkout. Customers choose the types of vegetables and fruits and weigh them by themselves. This can solve the shortage of labor, but it requires high customer integrity. However, to say that customers can be trusted, Costco supermarket continues to hire people at the exit to check whether the customer's small ticket is consistent with the things on the shopping cart.
According to US media reports, although the number of non-agricultural employment in the United States has increased by 17.4 million since April 2020, it is still 5 million lower than before the outbreak in the United States. According to the data of the National Federation of independent business, 67% of small businesses in the United States recruited employees in September, but a record 51% of job vacancies were not filled.
In order to recruit staff, American companies have raised starting salaries, increased signing bonuses and holiday wages. Costco has raised the minimum hourly salary to $16. It is reported that Amazon recruits 5000 employees in Houston, offering an hourly salary of $18 and signing bonuses of up to $3000.
The labor shortage is widespread in all walks of life in the United States. However, the shortage is mainly blue collar workers and seasonal workers. In the past, American retailers used to increase their manpower before holidays. Now they find that the labor reserve in the market shrouded by the epidemic is seriously insufficient.
Where are the workers?
Some experts attribute it to the tide of retirement and the reduction of immigration under the epidemic. Vidya Mani, an associate professor at the University of Virginia's Darden School of business, believes that many industries only pay the minimum wage, and the labor force will spontaneously shift to areas with higher income.
The conservative media Wall Street Journal published an editorial attacking "Biden economics" The White House and the Federal Reserve, on the one hand, stimulate demand through government spending and loose monetary policy, on the other hand, squeeze the supply side with the promise of more regulation and higher taxes.
Another commentary by Ron Johnson criticized the argument that "everyone must go to college and prepare for the future of high technology" for serious defects, accusing the United States of too much political rhetoric about creating high paying jobs.
The article questioned: if everyone goes to college to be a manager or technician, who will produce and build? It is also worried that there may be a long-term shortage of American labor force, and attributed this shortage to American society's contempt for blue collar jobs, low birth rate, retirement of baby boomers, increased social welfare and broken immigration system.
Supply chain "off chain"
Houston port is the sixth largest container port in the United States, and the tonnage of water transportation ranks first in the United States. In the photos released by the official twitter of the port in October, there are containers everywhere, some of which are stacked high enough with five floors, which is spectacular. Official data show that in September this year, the number of standard container containers in Houston port increased in double digits for the seventh consecutive month, and the import of steel increased by 1. 5% compared with the same period last year 61%.
In an interview with American public radio at the end of October, Roger Gunther, executive director of Houston port, said that the congestion of Houston port is not as serious as that of Los Angeles port, but there are also 5 to 10 cargo ships waiting for berths to enter the port. In Houston port, there is a shortage of truck drivers and trucks, so that containers can not be transported away in time, and the port lacks enough space for arriving ships to unload.
In Gunther's view, Americans' home state under the epidemic has led to a large increase in the demand for goods. He said that because of the epidemic, people stay at home, do not go on vacation, do not go to restaurants, do not buy services, and receive economic stimulus checks issued by the federal government, they buy furniture, bicycles and household goods one after another. This has led to a surge in imports, put pressure on the supply chain, and the container terminal has become a success For the warehouse.
In short, the supply chain involves complex global logistics management, from overseas factory production, arrival ship transportation, to ports, transportation trucks and storage warehouses, to retail enterprises that deliver products to customers, one link will fall off the chain, and all links will fall off the chain. Gunther believes that under the epidemic, economic activities are unbalanced, supply and demand do not match, and there are bottlenecks at both ends of the global supply chain For example, earlier this year, shoe factories in Vietnam closed down due to the epidemic, delaying orders for Nike sneakers for several months.
The supply chain problem also reflects the strong demand of the United States for Asian imports. The ports of Los Angeles and long beach on the west coast are the closest to Asia, dominate the container trade and have the most serious congestion. Although cargo ships have to sail another 5500 nautical miles (10186 kilometers) through the Panama Canal when they arrive at Houston port However, Asian imports also account for the largest share here. Margaret Kidd, a logistics expert at the University of Houston, believes that in the future, the import ports of the United States should be diversified to mitigate the risks of the supply chain.
In the epidemic, the online shopping scale of Americans is getting larger and larger, and the "Black Friday" and Christmas shopping season are coming. Including Gunther, more than one American industry insider predicted that the supply chain bottleneck of American ports "will get worse before it gets better", which is particularly unfavorable to small enterprises.
However, many economists expect that by the middle or second half of 2022, the imbalance between tight supply and strong demand is expected to ease. With the expiration of large-scale U.S. economic stimulus measures, commodity demand may cool, and U.S. consumer spending has begun to shift from goods to services. However, the solution of supply chain problems depends on many variables such as weather disasters and epidemic fluctuations .
When can the United States be normal
When and how will the world return to normal? There seems to be no answer at present.
In fact, if normality means returning to the situation before the epidemic, I'm afraid it's unrealistic. At both the macro and micro levels, once structural change begins, it is bound to embark on the road of no return. Moreover, since the industrial revolution, the world has experienced several stages of globalization. As Vincent Reinhart, Mellon's chief economist, said: "This is an increasingly complex modern economy... Restarting this machine is very complex."
Now the United States is broadcasting a domino supply economics course. The supply chain is falling off, prices are rising, and there is a shortage of blue collar workers doing manual work everywhere... Can we help the United States out of the supply chain dilemma with innovative thinking by strengthening the reflection on its own industrial chain structure? No matter how these problems will be solved, supply in the United States Under the reality of high globalization, every move of the United States is bound to affect and even shape the new direction of globalization.
Biden said at the global supply chain summit that the supply chain problem can not be solved by any country through unilateral action, and coordination is the key.
The best way to reduce current delays and enhance future supply chain flexibility is for countries around the world to work together on the whole supply chain from raw materials to warehousing and distribution.
The US supply chain needs more:
Diversification - not dependent on any single source;
Security - free from natural and man-made threats, including cyber and criminal attacks such as extortion software;
Transparency - so that governments and enterprises can better predict and respond to problems;
Sustainable - ensure that there is no forced and child labor, in line with U.S. climate goals.
In fact, the Biden administration has implemented and plans to take a number of measures to ensure the normal operation of the U.S. supply chain this year. The federal government of the United States even set up a special fund for monitoring and strengthening the supply chain for the first time. In early 2022, the United States will also host a multi stakeholder Forum on the supply chain chaired by the Secretary of state and the Secretary of Commerce.
Since the outbreak, most people have never thought that the problems caused by supply chain disruption would be so huge. From cars to electronic products, from shoes to furniture, there are delays and backlogs. Global trade routes are so fragile that people "can't do business as before".
Inflation, labor shortage and supply chain problems are so closely related that they are like gears that bite each other. Insufficient supply means rising prices. According to Bloomberg's economic forecast model, the continuous shortage will keep the US CPI at about 5%. The rising inflation rate swallowed up the wage increase and forced workers to ask for a larger salary increase. The supply chain was squeezed by demand rebound and labor shortage, which exacerbated the shortage. The epidemic situation and many variables of global politics have also become uncertain factors in the prospect of global supply chain.
Objectively speaking, the fall of the global supply chain is inseparable from the epidemic. The epidemic has put the U.S. service industry into a "dormant period" to some extent, and the federal government's economic stimulus measures have boosted the demand for imported goods. With the decline of the epidemic, many large companies are ready to put more employees back to work, which has also led to large-scale purchases of commodities.
In the past, American companies were used to offshore outsourcing and real-time inventory. The lower the inventory, the better. However, the vulnerability of this operation model was exposed under the tension of global supply chain. American newspapers have made a lot of reflections on this. There are voices from the left and right media calling for the relocation of more manufacturing industries, investment in infrastructure construction and strengthening the supply chain in the United States.
It is reported that American retailers are stocking as much as possible because they are worried that the supply chain will continue to fall off, resulting in a rare surge in inventory, which makes the demand for imported goods more vigorous in the United States. Elon Musk, Tesla's boss, said: "the fear of depletion has led every company to over order."
A novel coronavirus pneumonia epidemic is a direct push, but the situation is also a product of two more deep-seated forces, the Economist magazine believes.
The first force is "decarbonization" - shifting from coal to renewable energy and trying to get rid of dependence on polluting energy.
The second force is protectionism. Some countries' trade policies no longer focus on economic efficiency, but regard it as a means to achieve a series of political goals and punish geopolitical opponents.
The prestigious MIT Sloan School of management has a "beer game" that allows MBA students to simulate the supply and demand dynamics among breweries, distributors, wholesalers and retailers. In this year's simulation game, hoarding impulse triggered panic buying from flour to microchips, resulting in bullwhip effect - an unexpected large order usually triggered a wave of panic orders and inventory increase, which will amplify along the supply chain and return to the original factory. Such simulation results show that human beings who make decisions under pressure and affected by emotion are the weakest link in the supply chain.
Since the world can't go back to the past, relying on inertial thinking may hit the south wall every minute. On the other hand, the world is still expanding in depth in the process of globalization. How to achieve breakthrough innovation, defeat protectionism and populism, and adjust and correct globalization is very important to the future of the world and human peace.
Source: outlook think tank. The author is Xu Jianmei, a researcher of outlook think tank in Houston
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