Business

US economy: Plenty of growth, not enough workers or supplies – Times of India

WASHINGTON: The U.S. economy is sparking confusion and whiplash almost as fast as it’s adding jobs. Barely more than a year after the coronavirus caused the steepest economic fall and job losses on record, the speed of the rebound has been so unexpectedly swift that many companies can’t fill jobs or acquire enough supplies to meet a pent-up burst of customer demand.

“Things exploded. It was like a light switch,” said Kirby Mallon, president of Elmer Schultz Services, a family-owned Philadelphia firm that repairs and maintains kitchen equipment for restaurants and other clients. “The labor market is just out of control. We literally cannot hire technicians… We ramped up so quickly, the supply chain wasn’t ready for it.”

Economic forecasters, with little historical precedent to guide them through the aftermath of a global pandemic, are pondering questions they can’t answer with confidence.

Does robust consumer spending reflect economic strength and resiliency? Or has it been temporarily propped up by federal stimulus checks?

Was an April run-up in consumer prices a temporary blip? Or an ominous sign of accelerating inflation?

Are two months of middling job growth the result of too much of a good thing, employers want to hire more than they can? Or a hint that the labor market isn’t as strong as economists think?

In many ways, the news has been cause to cheer: The economy grew from January through March at a red-hot 6.4% annual pace. And in the current quarter, that pace is thought to be accelerating to nearly double-digits.

Yet the full portrait of the U.S. economy is a rather more nuanced one.

Employers last month added 559,000 jobs on top of 278,000 in April. Those would ordinarily be seen as quite healthy numbers. Yet against the backdrop of record-high job openings and free-spending consumers, forecasters had expected much more hiring. Some economists had envisioned the recovery from the pandemic recession driving monthly job growth of 800,000, 900,000, even 1 million or more.

Explaining the shortfall, economists point mainly at what they call a “short-term mismatch”. Companies are posting job openings faster than applicants can respond. After all, many Americans are contending with considerable tumult at home after many jobs permanently vanished over the past 15 months. And some people, earning more from federal and state jobless aid than they did when they worked, are taking their time before pursuing another job.

Consider Gina Schaefer, who owns 13 Ace hardware stores in Maryland, Virginia and Washington, D.C., and who has been rapidly staffing up for the spring and summer, when her sales typically hit highs. Schaefer has hired nearly 120 people since March, both seasonal workers and long-delayed replacements for people who left last year when Covid ravaged the economy. Her company pays a minimum of $15.50 an hour, to compete with larger chains that now pay $15, and provides health insurance, paid vacation, sick leave and a 401(k) plan after employees have been on the job for about six months.

After months cooped up at home, millions of consumers have rushed back out again, in buoyant spirits and eager to spend, their finances bolstered by $1,400 federal stimulus payments earlier this year. Among the affluent, sharp gains in home and stock market equity have further emboldened their impulse to spend.

Consumer confidence is high. And Americans stepped up their spending again in April after a powerful gain in March fueled by $1,400 stimulus checks to most individuals.

Financial markets endured an unwelcome jolt last month when the Labor Department reported that consumer prices had jumped 0.8% from March to April and 4.2% from 12 months earlier – the largest year-over-year increase since 2008.

Some leading critics, including former Treasury Secretary Larry Summers, have been warning that President Joe Biden’s trillions of dollars in federal stimulus money risk igniting inflation and forcing the Federal Reserve to resort to interest rate hikes, which could derail the economic recovery.

However, Fed Chair Jerome Powell and many economists say they think the inflation surge will prove short-lived. They say it reflects mainly temporary supply-chain bottlenecks that have forced up prices but that should ease over time. For now, though, shortages of lumber, computer chips and other materials have contributed to inflation pressures.

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