Labor Shortage Is a Bottleneck That Will Persist

The supply chain is definitely disrupted but also recovering. That is the contradiction that has been revealed by the quarterly tradition of businesses giving analysts an explanation of their earnings results. Let’s start with the positive news: Most executives concur that transportation bottlenecks are thinning and raw material prices are leveling off. The COVID-Zero lockdowns in China and a lack of competent labor in the US are the main obstacles currently standing in the way of returning the supply chain to normal. The epidemic made the C-suite aware of the risks of having a supply chain that is overly dependent on China.

With the help of other sources in other nations, this is being swiftly handled. By pushing suppliers to produce in the US, or at least in the Americas, firms hope to reduce supply chains in the long run. This brings up the tricky problem of having a workforce that is suitable for its job, which calls for collaboration between the public and commercial sectors in education and a reevaluation of our immigration policy. Before the epidemic, the shortage of trained personnel on US factory floors was a matter of worry; now, it is an emergency. No education specialist is required to understand that we need more options for vocational training that involve nearby employers looking to hire. Fixing the flawed immigration system in the US is far more difficult and calls for a political deal in Washington.

These are, however, long-term fixes that won’t deal with the current demand for a looser labor market, where the unemployment rate of 3.5% matches a low from 2019 that hadn’t been seen since the 1960s. The Fed is committed to easing conditions by vigorously suppressing demand.

You need to see the pendulum swing back, according to Robert Rourke, head of global industrials for the Chicago-based consultant L.E.K. “The availability of experienced people certainly is a stimulant to some of these difficulties in supply chains.”