The Hill

Summer supply chain and labor issues are bad news — for Republicans

By June 4, 2021No Comments

(This article originally appeared on The Hill)

Ask any small business owner or big company executive what their biggest headache is right now and they’ll likely name two things: supply chain and labor.

We’re familiar with this story by now. Coming out of the pandemic recession, demand for goods is inordinately , which is great news, except for the fact that most companies aren’t able to keep up with this demand. Raw materials are scarce. Our major trading partners in , and South America and parts of Asia are struggling to get back on their feet. Other major trading partners like and are still fighting off the pandemic. Goods that are being shipped are stuck in traffic jams outside of ports that are just getting back up and running. But that’s only half the problem.

The other half is people. Even when supplies are available, there aren’t enough workers to turn them into products and services.

We’re familiar with this story too: our labor force is slow to get back on the job . Many are still collecting stimulus payments, tax benefits and unemployment wages that may be encouraging them to stay at home . Others are being forced to stay at home to look after children attending virtual classes. Despite the relaxing of mask rules, plenty of people are still wearing facial coverings , which indicates a continuing fear of getting back into public and the resumption of their normal lives. Unfilled jobs are at historic highs. Workers are saying “pay us more.” Business owners are saying “get back to work.” Everyone’s frustrated.

You would think that all of these difficulties would be good news for Republicans. And right now it is. They can blame the president and point their fingers at Democrats as the culprits. And that’s exactly what they’re doing. The Republican narrative is that Democrats have created this situation with their overreaching stimulus programs and their panic-inducing COVID stories that are keeping people scared, workers at home and their faithful desirous of more federal spending and bigger government safety nets. It makes a good story, for now.

But the reality is that all of these problems are bad news for the Republicans, not the Democrats. That’s because this story is not going to last. Why? Because the two biggest problems challenging businesses right now — supply chain and labor — aren’t going to be so problematic by the end of the year.

“Yeah, we’ve got supply chain problems right now,” a client recently said to me. “But they’ll work themselves out. They always do.” He’s right. And the evidence points to that. Slowly, but surely, these problems are resolving themselves.

The average wait for berth space at the L.A. port was recently reported at 6.1 days, compared with 6.6 a short time ago (that number had peaked around 8 days in April). New York and other East Coast reports, which remained open during the pandemic, are now seeing significant rises in tonnage accepted.

Europe, already experiencing a dramatic drop in cases, will soon be back to business, as will India and other sources of raw materials from Asia. Delays caused by weather and problems in the Suez Canal are behind us. The Baltic Dry Index, a measure of freight charges, has reached ten-year highs, which indicates a high demand for shipping traffic. Shipping companies are finding it more profitable to send empty containers back to Asia rather than waiting for them to fill up here so that they can quickly return fully laden with more products.

In the U.S., industrial production , while still below pre-pandemic levels, has been surging. Manufacturers are shipping more products , despite supply and labor shortages. There’s more pressure on the Biden administration to revisit tariffs that are causing increases in steel and lumber prices, which would encourage more buying and help alleviate inventory concerns. Most economists, as well as Fed and Treasury officials, are predicting that inflation spikes — driven by higher energy costs, price-gouging and lack of supply and labor — will eventually come in line once the economy catches up.

In other words, the cavalry is on its way. Not immediately. But soon. And along with the influx of supplies will be an influx of workers. By the end of September , all of those wicked federal unemployment benefits that have caused such hand-wringing will have mostly ended. Schools, restaurants and stores will be fully reopened. Planes and hotels will be filling up. And, despite the few that will be still clinging to their masks, most Americans will feel comfortable getting back to work. Job openings will fall, the availability of workers will rise and the cost of labor will level out.

Sure, the Republicans will be warning us of higher taxes, continued inflation, unsustainable deficits and anti-business regulatory and labor policies that will continue under a Democratic majority. They’ll be right. But by the holidays, most businesses will be looking back at a strong year and the prospect of an even stronger year ahead. So will they even care?

Supply chain headaches. Labor woes. Inflation fears. By the time midterms are here in 17 months all of these issues will be ancient history in the minds of many business owners. And that will be bad news for Republicans looking to win back Congress.

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