Businesses’ need for workers similarly rebounded as firms look to service outsize consumer demand, but the US added only 266,000 jobs in April, a sharp deceleration from the job growth seen in March and a big miss of the 1 million-payroll estimate. Yet average hourly earnings surged through the month and the average workweek grew longer as businesses converted part-time employees to full-time work.
These developments are “consistent with constraints” in the labor market, rather than a lack of demand for workers, JPMorgan said.
“We had anticipated bottleneck pressures this year, but signs of similar constraints in US labor markets is a surprise,” the team led by Bruce Kasman said in a note to clients.
Economic data published Tuesday morning supports such claims. The country ended March with a record 8.1 million job openings, according to the monthly Job Openings and Labor Turnover Survey. The hiring rate climbed slightly, and about 1.2 Americans competed for every job opening. Although April JOLTS won’t be released for another month, the March figures suggest businesses were ramping up hiring efforts as the economy continued to reopen.
The rising commodity prices also point to another pressure plaguing the labor market. Experts including Federal Reserve Chair Jerome Powell suggested before the report that a jump in average wages would be indicative of a worker shortage. If wages need to climb to accelerate hiring, the combination of higher labor and materials costs could further boost inflation and create new economic worries.
JPMorgan, for now, sees such bottlenecks fading as the recovery charges on. Sustained policy support and strong economic growth should drive more Americans into the workforce. This should, in turn, alleviate some manufacturing pressures and help producers address their massive order backlogs.
The bank isn’t alone in its optimism. The expiration of bolstered unemployment benefits and the start of the school year will push more Americans to job openings, Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said Sunday.
The creation of new businesses can also offset permanent job losses. While April job data was hugely disappointing, it still seems as though the labor market will emerge without the long-term scarring many feared, Nobel prize-winning economist Paul Krugman said Wednesday.
“People seem to be eager to go back to work. Not enough to make companies that don’t want to pay higher wages happy. But this whole thing is really looking like a V-shape recovery,” he told Insider.
Senate Minority Leader Mitch McConnell on Thursday faulted the Biden administration for approving stimulus benefits, and claimed they are hurting the nation’s economic recovery.
“We have flooded the zone with checks that I’m sure everybody loves to get, and also enhanced unemployment,” McConnell said from Kentucky. “And what I hear from businesspeople, hospitals, educators, everybody across the state all week is, regretfully, it’s actually more lucrative for many Kentuckians and Americans to not work than work.”
He went on: “So we have a workforce shortage and we have raising inflation, both directly related to this recent bill that just passed.”
McConnell’s comments reflect longstanding GOP concerns about disincentivizing people from returning work as a result of issuing direct payments and federal unemployment benefits. Democrats approved a massive $1.9 trillion stimulus package in March, arguing many households needed immediate financial aid from the government.
No Republicans voted for the relief package. The unemployment rate has steadily fallen to 6%, and new claims have dropped for four weeks in a row.
But employers are growing alarmed over worker shortages, particularly those in the restaurant sector, while shortages of commodity goods are causing massive price increases in certain pockets of the economy. The trends caused the White House to defend its policies on Thursday. White House Deputy Press Secretary Karine Jean-Pierre said there was “little evidence” that enhanced unemployment insurance was enticing people away from work.
Some economists note that a key feature of a labor shortage – rising wages – is not in evidence, as businesses typically take that step to lure job-seekers from a scarce pool.
“When you don’t see wages growing to reflect that dynamic, you can be fairly certain that labor shortages, though possibly happening in some places, are not a driving feature of the labor market,” Heidi Shierholz, economist and director of policy at the left-leaning Economic Policy Institute, wrote on Twitter. “And right now, wages are not growing at a rapid pace.”
Federal Reserve Chairman Jerome Powell weighed in on the issue last week at a press conference. He said potential factors that could explain the shortage include a lack of childcare, lingering COVID-19 fears, and school closures.
“We don’t see wages moving up yet. And presumably we would see that in a really tight labor market,” Powell said. “And we may well start to see that.”
An ongoing computer-chip shortage has affected cars, iPads, and dog-washing technology alike. Chipmakers like Intel had already seen production issues pre-pandemic, but as with many industries, COVID-19 brought a variety of new supply-chain issues. The chip shortage is a problem for consumers wanting basically anything with a computerized component, which is much of the economy. Take cars as an example.
The semiconductor shortage has hit automakers the hardest. In January, the consulting firm Alix Partners estimated the automotive industry would lose $61 billion in revenue from the shortage this year. As Insider’s Katie Canales reported, demand for chips has gone up as consumers scrambled to buy cars and other technologies that use them.
But as more cars went into production, chip competition went up. Since then, many carmakers have been forced to shut down plants and prioritize which models they produce, while car prices at dealerships have continued to go up.
Buyers are still looking for vehicles, creating a competitive used-car market. As USA Today reported, used-car prices are on the rise as the aforementioned chip shortages affect new-car production, and buyers have turned to older ones instead, while Axios reported the average price of a used car has hit $17,609.
A UBS note estimated that in April, used cars saw their largest monthly price increase in 68 years of tracking, with prices rising between 8.2% and 9.3%.
If you’re looking to rent, you might also be out of luck: Insider’s Brittany Chang reported on the “perfect storm” hitting rental cars right now, with prices surging and demand increasing. Americans are itching to go on vacation this summer, as more people are vaccinated and some restrictions loosen. That’s leading to far more demand — but rental-car companies had sold off parts of their fleets early into the pandemic, leaving fewer cars to go around.
It’s not all bad news for used-car lovers, though: As USA Today reports, the trade-in market is hot, too, meaning your old car could be worth more right now.
Gas prices have skyrocketed in recent months, jumping 22.5% in March from the previous year, according to the US Bureau of Labor Statistics’ Consumer Price Index. Much of the surge in gas prices started with the extreme Texas freeze, which halted a fifth of the country’s oil-refining capacity in its tracks for weeks at a time.
Plastics and palm oil
The devastating winter storms in Texas also left their mark on the plastics industry. As Insider’s Natasha Dailey reported, the state is a key plastics exporter — and the storms made many plants, which are difficult to reactivate, press pause.
According to the Financial Times, rising plastic prices have led to an increase in packaging costs. Citing data from Mintec, the Financial Times reported that those costs have increased by nearly 40% from the start of 2020, marking “historic highs.”
Palm oil, which is in a majority of those packaged products, also saw its prices climb, according to the Financial Times. That’s due to yet another labor shortage; the industry had already been contending with finding more sustainable production methods.
In September, Insider’s Rachel Premack reported that pay for truck drivers was on the rise, coming in at “record-smashing levels.” But the pay hike — and increased demand — comes after an exodus of drivers in 2019; Premack reported at the time on what some called a “trucking bloodbath,” as trucking companies saw profits fall, with some even going bankrupt.
Now demand is surging, according to The Journal, and if everything continues as is, that gap could deepen.
Homes and vacation houses
The US was facing a shortage of 3.8 million homes as of April, according to Freddie Mac. Home builders have been struggling to keep up with demand as remote work fuels interest in spacious housing, with house prices rising at their fastest pace in 15 years, The Wall Street Journal reported. Lumber prices are also driving the cost of new homes even higher.
Even vacation-home rentals are at an all-time high. A house in the Hamptons rented for $2 million this summer, and 85% of vacation rentals in popular destinations like Cape Cod, the Outer Banks, and the Jersey Shore are booked through August, according to the rental site VRBO.
If you’re wondering why the houses around you are getting more expensive, look to their component parts. No, seriously: Lumber prices have soared, and, as Insider’s Ayelet Sheffey and Libertina Brandt reported, builders are even increasing house prices in an attempt to offset demand.
It’s due to another pandemic disruption, as lumber mills were forced to temporarily close for safety concerns. When they reopened, they couldn’t keep up with a scorching-hot housing market, goosed by a work-from-home economy, record low mortgage rates, and the need for personal space during the pandemic.
According to an April analysis from the National Association of Home Builders, soaring lumber prices added $36,000 to the cost of a new home. Lumber prices “remain stubbornly high,” according to the report, due to mills shutting down, unexpected demand from big-box retail and DIY-ers, and tariffs imposed on Canadian lumber.
Household products like toilet paper and tampons
Many household goods including toilet paper, diapers, and tampons are also facing supply problems.
One of the biggest producers of the pulp used to create toilet paper told Bloomberg that port delays and high shipping costs are causing companies to push delivery dates back months.
The work-from-home lifestyle helped the furniture industry boom but to such an extent that customers are seeing delivery dates that are months out.
In February, La-Z-Boy executives said customers could expect delivery dates that are five to nine months out from their order dates. Other furniture companies like Kasala, a Seattle-based chain, said they don’t expect to get furniture parts until at least December.
The furniture shortage has been exacerbated by a spike in homeownership, as the number of available and unsold homes sits at record lows. In other words, a lot of new homeowners are waiting a long time for their new living-room sets.
Bacon and hot dogs will likely be in short supply this summer.
The pig shortage dates back to the onset of COVID-19 and outbreaks in at least 167 meat-processing plants forcing almost 40 plants to close as of June 2020. As vaccination rates pick up and people prepare for summer vacations and cookouts, analysts told Insider’s Natasha Dailey demand will outstrip supply.
With pork companies still struggling to overcome lower production rates in 2020, the matter only intensified when high instances of disease hit the hog population this past winter.
Some companies are already seeing the impact on their shelves. In March, Costco said its supplies of cheese, seafood, and olive oil were running low.
General Mills said it has been forced to raise prices due to the delays increased shipping costs. Coca-Cola also raised prices to combat the supply-chain crunch. Neither company specified which products would be affected.
Coffee has also been hit by delays, Bloomberg reported in March. Peet’s and JM Smucker, the brands behind Folgers and Dunkin’ coffee, have said they’re facing rising costs. Reuters reported that in February, port delays pushed coffee prices to their highest point in more than a year.
This summer pool owners will see the worst chlorine shortage in US history, according to CNBC.
Supplies of the chemical have been strained since a fire at the chlorine manufacturer BioLab in Louisiana in September. The price for chlorine used in pools has nearly doubled this past year and is expected to rise even more to meet demand this summer.
Corn is a key crop for many products, including fuel and different foods. As supply concerns loom, corn prices are popping off, according to Axios.
There’s a few reasons that demand is so high: After an outbreak of swine fever in China, pig herds were “decimated,” according to Axios, leading to huge corn demand in China. That spike in demand is coupled with corn crops in Brazil and Argentina experiencing both bad weather and pandemic-related labor shortages.
Now corn prices are on a record-setting clip, rising by 16% in April alone.
And, as Fortune reported, there could be a domestic supply issue too. Droughts and a rough winter are both concerning — and if American crops can’t fill in the gaps, prices could rise even more.
Finally, a commodity unlike all the others is in surprisingly short supply: workers.
Major labor shortages are hitting businesses across America. As Insider’s Kate Taylor reported, chains like Dunkin’ and Starbucks are struggling to find workers — leading to reduced hours and hesitance on opening indoor dining back up.
There’s a few possible reasons that unemployed workers are opting not to return, according to Insider’s Ayelet Sheffey. They include workers making more on unemployment benefits than in their prior work as well as continued concerns over COVID-19 and the need to provide childcare at home.
The latest commodity seeing a price squeeze amidst shortages and high demand is used cars.
A note from UBS researchers led by Alan Detmeister found that not only did used-car prices climb in April, but the monthly price increase could be the largest in 68 years of tracking. It looks like prices may have risen by 8.2% to 9.3%.
Used cars have been in high demand due to a few of the factors driving the shortages all over the American economy. The economy is reopening, people are ready to spend money (perhaps from new stimulus checks), and they want cars – especially as more suburban areas boom with wealthy transplants. But new cars are being hit by a computer chip shortage that’s hitting the automotive industry hard.
As Insider’s Grace Kay reported, semiconductor shortages could cost automakers billions, and has already led to lower production rates for new cars. Even Elon Musk has said that Tesla’s suffered from supply chain and semiconductor woes. Cue a used-car boom, with the market heating up and trade-ins fetching higher prices.
According to UBS, prices on used cars may only climb in the coming months, due to a lag in wholesale to retail pricing. New car prices are also likely to pick up, increasing by 1%.
Why there are so many shortages, and which ones may pick up next
It may seem that everywhere you look, a new product is in a shortage. Chicken, diapers, corn, gas, furniture: The list of shortages goes on, and will likely only grow amid economic reopening. That’s due to some of the same factors impacting used and new cars. Supply-chain issues have persisted throughout the pandemic, and factories shuttered for safety reasons need to crank back to life as demand steepens.
The climate crisis also has a role, with several domestic products in the US – such as plastic and gas – impacted by factors including the devastating winter storms in Texas. Droughts are impacting the worldwide corn supply amidst high demand; Insider’s Will Daniel reports that corn prices have jumped 142% in the past year.
UBS projects 12-month headline Consumer Price Index (CPI) inflation rising to 4.3% from 2.6%, “an enormous surge over just the past few months.” Economists’ median estimate for April CPI is 3.6%, per Bloomberg.
UBS projects hotels and airfares will be next to see substantial price increases. Axios reported – in an article aptly titled “Our crazy, booked-up summer” – that summer travel in the US is about to boom, with a particular emphasis on domestic travel.
A recent report from the US Travel Association found 72% of Americans are planning a summer vacation in 2021; that’s compared to 37% last year. That probably won’t help the already intense rental car shortage.