Abundant Crisis – Niskanen Center
These complaints are increasingly common, and the vast majority of us identify them as hyperbolic. But this is certainly the case of Americans who insisted on seeing the glass half full – and failed to realize that the glass was actually a giant bucket. We do not struggle with the provision of goods and labor because we are entering an era of scarcity. Instead, crowded ports and “leasing” signs are the growing pains associated with entering an age of plenty.
Somehow we are in a situation where the benchmark S&P 500, rapid recovery in the labor market, increased family wealth, rising consumer demand, rapid wage gains (especially at the bottom line), and manufacturers working ceaselessly are portrayed as evidence of policy error.
Joe Wiesenthal (@TheStalwart) October 26, 2021
Abundance in trade
A recent article in The Hill asked, Are supply chain disruptions the beginning of the end of globalization? The article suggests that the answer is “yes” and that “American consumers, who live in the land of plenty, should get used to scarcity.”
Some grocery aisles are already oddly empty, and some people wait months to get some of the most recently ordered goods. But this is not due to scarcity. It is due to difficulties in managing abundance.
Earlier in the pandemic, many people delayed spending. Now people are more willing to open their wallets. Personal consumption expenditures, a measure of consumer spending, fell significantly at the start of the pandemic, but have met or exceeded pre-pandemic trends since the summer.
Much of this spending went to imports.
The total volume of imports at the top five container ports increased by 19% over the past two years (compared to January-August). Higher than every month of the year relative to the same month in 2019.
Usually the volume reaches about 4% per year.
Ports cannot handle all the increased demand. pic.twitter.com/Juk2QW1wtn
– Jason Furman (@jasonfurman) October 15 2021
Our ports are simply struggling to manage a 20 percent increase in volume, forcing ships to wait weeks or months offshore before bringing their goods to market.
This is frustrating. Many of us were expecting delivery within days of ordering. I ordered soccer cleats for my daughter at the start of the fall season, and it seems she won’t arrive in time for her last game. But it is important to realize that we are already receiving more goods than usual – even if not as often as we would like.
Plenty of work
The current problem in the labor market is not that “nobody wants to work anymore”. It is, by and large, that the majority of people who want to work already have jobs. This makes it difficult for companies to hire new workers. The economy we are in now is not the same as the economy of the early pandemic or the financial crisis of 2008. It is roughly the economy we had in 2016.
To see why, look at the graph below, which plots the standard unemployment rate on the y-axis and another metric that tracks the percentage of the working adult population — people aged 25 to 54 — who are actually employed. Looking at both metrics is helpful because the unemployment rate for younger and older Americans, who may move in and out of the labor force for reasons including school and early retirement, is difficult to explain. The lower and to the right our data lies, the happier the story it tells us about the job market.
In blue, we see the annual change for both variables in the recovery from the 2008 financial crisis. In red, we see the same variables, but we cover only the past four months.
What should be striking in this graph is how quickly the labor market has recovered. In June of this year, our unemployment rate was 5.8 percent and our employment/population ratio was 77.1 percent. In other words, the labor market was almost in the same state as it was near the end of 2014. But by September, unemployment had fallen to 4.8 per cent while the employment/population ratio had risen to 78 per cent, which is roughly where the labor market was. As of 2016.
In other words, the labor market made as much progress in four months as it had previously been in nearly four years. Alan Cole Off full stack economics This has been called “torsion velocity recovery”.
One of the ways I think about getting our warp speed back is by imagining that we’re traveling back in time during the 2000s, but 4-12 times faster.
Currently, we are “in 2014”. But we will be in 2015 by May. and 2016 by August.
– Alan Cole (@AlanMCole) April 2, 2021
Even the 2016 economy still leaves room for improvement. As the graph shows, the labor market continued to expand over the next three years. But we are a long way from a crisis in which companies cannot find workers, and as in any strong economy, if you want to hire more workers, you need to attract the people who Already jobs.
Maintaining a plentiful economy
A recent Bloomberg article noted that Domino’s Pizza saw its first-ever decline in earnings in the last quarter. This was prompted, at least in part, by difficulties in hiring enough drivers to deliver pizza on the spot.
Some people may take such news as a sign that workers are not ready to work at the moment. This belief has political implications, such as ending Enhanced unemployment insurance program or present Return to work rewardsBut these tools would be ineffective if the cause of the problem was not that people lack motivation but many of them are already working elsewhere.
Pizza delivery is the type of industry that you may have a hard time adapting to this situation. Before the pandemic, places like Papa John’s were struggling with a Turnover rate of 220 percent. Few people intend to work in pizza delivery permanently; Oftentimes, it is a job that people do to earn extra money among other opportunities.
As a result, the pizza delivery business is somewhat dependent on a lax job market. When workers find other opportunities, finding delivery drivers becomes more and more difficult. Pizzerias can increase their wages and prices, but it may also be the case that some pizzerias will go out of business because For a booming economy, not though. This may be the case in many similar employers whose business models are built around having low-paid, on-demand workers.
This unequal prosperity – with some companies having a hard time adjusting to a booming economy – can be dangerous. Business models such as pizza delivery are currently organized to expect people to be available to perform work at fairly low wages. As a result, a group of companies will benefit from keeping the economy short of potential. Economist Michael Kalecki argue As the economy approaches full employment, some business interests will begin to push against government policies that maintain this growth.
While the economy is doing well now, we need to maintain the political and economic forces that allow it to thrive. It means keep The Fed focused on full employmentAnd Follow a sustainable fiscal policy, And Reduce costs on the supply side. But it also means acknowledging that some people will find full employment inconvenient, and learning when to ignore their grievances.
Image source: Try via iStock