Ongoing Shortages Could Significantly Affect The Stock Market

Today, many strange and not-so-strange shortages are popping up left and right, whether it be well-documented shortages (e.g., rental cars, bicycles, and semiconductor chips) or more mysterious shortages (e.g., Halloween candy, French fries, and Thanksgiving turkeys). And this problem is not just a domestic one. In the face of anemic economic growth, natural gas prices in Europe have quadrupled, coal prices in China stand at an eight-year high, and gasoline shortages in the United Kingdom are accelerating. At the beginning of the coronavirus pandemic, it made intuitive sense for the world to run short of surgical masks, computer webcams, and hand sanitizer. 18 months later, despite the re-opening of the economy, consumers are experiencing surprisingly long lines, higher prices, limited choices, and constant references to amorphous “supply chain issues.” In too many cases, there is no stock available, and no idea when the product will be delivered.

It would be overly simplistic to just to blame the coronavirus, which has certainly contributed to the current series of global supply chain problems. In reality, the pandemic has often just exacerbated already existing issues. The conditions in place prior to the pandemic helped greatly to create today’s shortages. Many of today’s supply chain issues can be associated with labor shortages, whether it be the labor necessary to make a product in a factory, receive a shipment of containers at a port, or transport shipments in a truck. Other significant and interlinked issues contributing to today’s shortages include transportation problems, deficient energy investment, excessive industry consolidation, and semiconductor issues.

Labor

When the pandemic caused a hard shutdown of the economy in March 2020, the U.S. labor force participation rate plunged to its lowest level since 1973, when a far more significant proportion of families were one-income households compared to today. While the participation rate has recovered some from the March 2020 bottom, it has stubbornly remained below pre-pandemic levels. Notably, the labor force participation rate remains relatively low even in the face of significant pushes on the local level across the United States to increase minimum wages.

With the Delta variant causing a persistent risk of coronavirus infections, companies are struggling to hire workers. Federal jobless benefits and continued childcare obligations may be acting as obstacles in preventing many workers from re-entering the labor force. Additionally, some workers have decided to switch careers during the pandemic or retire early after a layoff. Others are quitting jobs that require them to work full-time in physical offices. Roughly 10,000 Baby Boomers have been retiring each day, and that…