Supply Chain Impact

WHAT WE’RE SEEING

LABOR MARKET Employee Scarcities

Worker shortages are severely impacting supply chains. As consumer demand surges back, businesses can’t find enough workers to meet that demand. Some workers are afraid of contracting COVID-19, some lack childcare, and others must stay home with their remote-learning children. Many workers are finding it difficult to work outside the home when only 60% of the 200 largest U.S. school districts were fully reopened by the end of April, and many childcare centers continue to operate at reduced capacity. Federal bonuses in unemployment benefits further dampen the rush for some people to return to work or take new jobs. According to the Labor Department, the average unemployment benefit recipient receives more than the equivalent of working full-time at $15 an hour. High Number of Vacancies Job openings hit a record high of 8.1 million in the first quarter of 2021. With fewer people in the labor force, labor supply is not bouncing back as swiftly as demand. While the overall economy gained 266K jobs in April, manufacturing lost 18K. The sector remains down 515K jobs since February 2020, a stark reminder that resilient supply chains are essential to growing jobs in the future. Demand for Higher Pay Workers are not accepting the low wages that they may have pre-pandemic, so companies are needing to adjust by either raising prices or cutting into profit margins. The Labor Department’s Employment Cost Index reports that wages and salaries for private-sector workers rose 3% in the first quarter compared to a year earlier, matching the growth rate at the end of 2019, when unemployment was near a 50-year low. Walmart gave raises to 425,000 employees in February, raising their average wage above $15 an hour. Projection As pandemic stimulus programs wind down, the current labor crunch could vanish, but that is unlikely. For years, social scientists have warned that because of declining birthrates, retiring baby boomers and severe immigration restrictions, the U.S. is approaching an era of labor scarcity. In manufacturing, sign-on bonuses and increased wages continue to be in effect. The past year has fundamentally changed the economy and what many Americans expect in their working life. This big reassessment — for companies and workers — is going to take a while to sort out and it could continue to pop up in surprising ways.

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