U.S. labor, supply ‘nightmare’ seen extending into second half

The helter-skelter playing out on U.S. factory floors from labor and supply shortages, transportation bottlenecks and the coronavirus looks likely to persist into the second half of the year.

That’s the message from the heads of lumber producers and makers of air conditioners to homebuilders and apparel manufacturers. Recent corporate earnings calls have been replete with mentions of cascading and inflationary effects that are hampering companies’ ability to meet demand.

Perhaps the best color was offered up by PPG Industries Inc.’s Michael McGarry. The paint maker’s chief executive officer described a day in the life of a plant manager in the middle of omicron:

“The toughest job in PPG right now is a plant manager,” McGarry said on PPG’s Jan. 21 earnings call. “They wake up in the morning, check their phone to see how many people call off sick, then they get to work. They go through the dock area to see how many trucks didn’t get picked up, and then they go to the receiving area and then find out what didn’t come in that was supposed to.

“And then they move it into the plant and the supply chain people are telling me that they’re going to have to make smaller batches because of lack of raw materials. And then the sales team is telling them, ‘oh, my God, if we don’t get paint out the door, here’s how many customers we’re going to impact.’ So, by the time they get to their desk, before they even have a morning meeting, they’ve had to overcome a number of issues.”

The lack of sufficient labor, along with job switching and recent omicron-related absences, is wrecking havoc on nearly every U.S. industry. The latest employment report on Friday showed while the labor force participation rate – – the share of Americans that are either working or looking for work – – climbed in January, it’s still well below pre-pandemic levels.

The report, which also included the largest monthly increase in hourly pay since the end of 2020, suggested a further tightening in the job market that adds pressure on the Federal Reserve to raise rates.