Credit: Guillaume Bolduc / Unsplash
The US economy grew at an annualized rate of 6.5% in Q2, according to new numbers from the Commerce Department. That growth was sufficient to lift economic output above pre-pandemic levels and would have been even larger were it not for a tangled web of messy supply issues.
Manufacturers will tell you that it takes years to ramp up a new microchip plant, and they’re right. Supply chains take time to build up. Automakers will tell you they’re turning away customers because they can’t get the chips needed to manufacture the cars customers want. They’re also right. Demand moves much faster. This all sounds academic and distant until some key input for your business, some commodity that has been readily available at a steady price for decades, suddenly becomes scarce and expensive and starts to cause all sorts of problems and delays. But we’re a manufacturing business… surely this won’t happen to service businesses, right?
There is one key input for all businesses, regardless of sector or industry, facing an acute shortage: workers. Hiring the right person for a position is never easy, but it is much easier when an open position attracts a large pool of applicants. This is no longer happening. Much like an automaker with customers ready to purchase a new car but can’t because of a material shortage, business owners are turning away customers because they’re at full capacity and can’t find any new staff to expand.
One argument is that expanded federal unemployment benefits discourage people from returning to work. Texas agreed, and was one of the first states to end the expanded UI benefits, hoping to make it easier for businesses to staff back up. New survey data from the Dallas Fed contradicts this argument—it remains hard to hire in Texas. An interview with one of the business owners surveyed explains why:
“We are hiring a few employees after the federal [unemployment] subsidy ended but continue to lose others oftentimes because they say they don't want to work or decide to attend a social function and walk off. They know they can get hired again by walking down the street. Hire three, lose four. Hire two, lose one. I have never seen anything like this in my almost-40 years of working. We continue to turn away business due to lack of employees. Raw product prices continue to significantly increase. It is difficult to raise prices, but we will have to soon. Our downtown area remains sparsely populated with little activity, which is critical to our business.” (h/t Joe Weisenthal / Bloomberg)
As labor increases in value, workers increase their options. This presents management with a choice: turn customers away… or innovate. Labor productivity measures the amount of output generated by a unit of labor. Increased productivity means more new cars created with less manhours required per car. It skyrockets in a tight labor markets, as businesses innovate new ways to operate in a market without cheap labor.
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ArchDaily partnered with Overview for this photo essay of large scale industrial landscaped photographs from above. Overview is a great daily newsletter of interesting landscapes shot from above. We highly recommend subscribing. Here's one from this week of Jacksonville, though, regrettably, of a highway exchange. Still a beautiful shot.
Credit: Overview / Maxar
What happens when surging demand meets constrained supply:
There's only so much one dog can take.
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