Twenty-one months after the country’s first confirmed case of coronavirus, the U.S. economy remains rocked by conflicting forces, with businesses and households struggling to adjust to what many hoped was a temporary disruption.
Uncertainty obscures the way forward. On hold supply chains have left ships – and the imports they carry – stranded outside major U.S. ports. Inflation has driven up the cost of everyday items and prices are not going down. Restaurant reservations have hovered for months, swinging up and down as Americans wonder if they feel safe amid the ongoing pandemic.
Meanwhile, the job market has whipped millions of Americans through layoffs and then rehires, with millions caught in the middle. Salaries are rising and people are changing jobs at an all-time high. And while growth for the year is still expected to approach 6%, White House and Federal Reserve officials underestimated the economic disruption that would persist throughout the second year of the pandemic. It now seems certain that many of these strains, both economical and viral, will continue into 2022, and possibly beyond.
“There is simply no roadmap to opening up a global economy in a pandemic, and people keep forgetting that we are still in a pandemic,” said Diane Swonk, chief economist at Grant Thornton. Now the recovery must not only mend what has been lost, but the “scars and wounds must heal” after hard-hit workers and industries reassessed their futures, Swonk said.
Swonk pointed to actor William Shatner, who exploded in space several days ago and compared to what’s going on in the economy: “We’re seeing friction when we go back to school.”
• Rising wages for some. As many companies tried to reopen quickly, they complained that it was difficult to find workers willing to accept the same pay and terms offered before the pandemic. Thus, a number of companies have increased wages in an attempt to lure workers away from other jobs. This has boosted incomes, especially for workers who are ready to jump ship for a new employer.
Workers who change jobs almost always earn larger increases than those who stay with the same employer, but this gap has widened to its widest point in more than two decades. Job changers got a typical hourly increase of about 5.4% from the previous year, according to the Federal Reserve Bank of Atlanta’s salary tracker, which analyzes data from the Bureau of Labor Statistics.
Raising wages can be a good thing, giving workers more money to spend to help the economy grow. But economists are worried about the spillover effects of rising wages as companies struggle to fill more than 10 million vacant jobs. If employers increase wages to attract workers, they in turn may have to pass these higher labor costs on to consumers in the form of higher prices. This could push inflation even higher.
• Will price growth persist? For months, Fed and White House officials have argued that inflation is a “transient” or temporary feature of the economic recovery, like an old car shifting into high gear. The expectation of many senior Washington economists is that once supply chains have time to clear their arrears, inflation will stabilize closer to the Fed’s 2% annual target in the year. during the next year.
But this message is becoming more and more difficult to defend. “Temporary” has lasted for months, and it will last for months. The September Consumer Price Index shows annual price growth of 5% or more for the fifth consecutive month. Additionally, rising food and shelter costs last month contributed to more than half of the monthly increase in all items, after seasonal adjustment, making it harder for people to afford daily expenses. . Wages are increasing, but this increase is eaten away by rising costs.
Throughout the pandemic, new and used cars have been a litmus test for the country’s supply chain problems and associated price hikes. The market is heavily dependent on trade and auto parts, which are in short supply due to a global shortage of microchips. Used cars and trucks have spiked inflation this year and are up 52% since September 2019.
But the Fed and the White House don’t just have to control inflation. They also need to control how they talk about it. Consumers can watch the signals Washington executives are sending as to whether higher prices persist. A Fed official is dropping the word “transient” altogether, saying it gives the public a false expectation that high prices will cool down in a short period of time.
“It’s not just about the time, it’s about whether it becomes a little more grounded in the underlying inflation trends. This is what we thought in terms of “transient,” said Tim Duy, economist and Fed expert at the University of Oregon. “And more and more, I would say it looks like it looks like the price pressures are more generalized and, therefore, more likely to lead to high core inflation in the future.”
Restaurant results have recovered at surprising speed in recent months. Data released by the Census Bureau on Friday shows restaurant sales topped $ 72 billion in August – roughly in line with the level that would have been expected had the pandemic never occurred. But employment in the sector in September remained about a million jobs below pre-recession levels, even as employers posted near-record number of job openings – 1.5 million nothing than in August. And the recovery has been uneven. Some restaurants are doing much better than others.
The disconnect is likely linked to the pandemic, as high levels of covid-19 cases appear to be linked to declining restaurant employment. In Detroit, Nya Marshall remembers when the Delta variant “knocked on everyone’s door” over the summer.
As fall approaches, Marshall runs his restaurant, Ivy Kitchen, with reduced hours and shifts. She said workers did not rush to the payroll when unemployment benefits expired and many are quitting the industry altogether, especially as child care is an urgent concern. Activity is still down 52% from pre-Covid levels. And Marshall knows she’s not alone.
“Delta is here, and there’s a misconception that restaurants have recovered, that we’re back to where we were,” Marshall said. “People are not comfortable going out. And if they do, we’re lucky the patio is still open. But the patio season is coming to an end soon.
• Supply chains are slammed. Why all this inflation? Prices for used cars and other import-dependent items rose rapidly as covid-19 wreaked havoc on global supply chains that were already stretched by Americans’ prolonged buying spree for goods at the time of the pandemic. Many of the goods successfully unloaded from ships end up stranded in US ports as trucking companies struggle to hire and rail yards suffer from their own backlogs.
Before the pandemic, container ships typically sailed directly from China to a berth in the ports of Los Angeles and Long Beach. But since the first pandemic winter, more container ships have had to wait in San Pedro Bay for a chance to dock and unload their cargo, peaking at 40 ships in February. Coronavirus cases plummeted in the spring and the backlog of ships began to decrease. While the delta variant has emerged in the United States, the number of waiting ships has increased along with cases of the coronavirus. More than 70 ships were waiting offshore on September 19.
Meanwhile, the cargo languishes on the container ships. Delays in the evacuation of cargo from container ships impact the supply chain. Federal Reserve Chairman Jerome Powell told lawmakers last month that supply-side constraints on the economy have “in some cases worsened”, adding “we need these bottlenecks supply to mitigate, to subside before inflation drops “.
The Biden administration several days ago announced a 24/7 operation at a key U.S. port and is working with major importers to clear a lane for freight ahead of the holiday season. Companies like Walmart, FedEx and UPS have also pledged to use extended hours at the Port of Los Angeles to offload shipping containers contributing to the backlog of cargo.
Achieving a 24-hour effort will depend on cooperation with shipping companies and foreign transport operators, said Frank Ponce De Leon, member of the Coastal Committee of the International Longshore and Warehouse Union for the division. Coast Longshore.
“This problem is not going to go away overnight, in a month. This is going to be a persistent problem for some time now, ”said Ponce De Leon. “There are things that can change. . . not only on the docks, but for the trucking industry, for the warehousing industry, for the rail industry. We can’t move cargo without these three parts of the puzzle.
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Laura Reiley and David J. Lynch of the Washington Post contributed to this report.