IN SHORT SUPPLY
Ohio business describes effects of pandemic
Buy a monument for your loved one’s gravesite from Logan Monument in Logan in southeast Ohio and expect to wait six months to a year before it’s put into its final resting place.
Blame COVID-19, which has created a plethora of problems from global supply chain bottlenecks to labor shortages so severe that some cemeteries Logan Monument works with don’t have the staff to do the prep work for a gravestone.
Beyond delays and shortages, soaring transportation prices are pushing up costs, further frustrating customers, said the company’s owner, Bill Boone.
“If you want something from overseas, it’s going to take a year, if you’re lucky,” he said. “Will it change? Will it get better? I hope so.”
The shortages, delays and rising prices that Logan Monument and its customers are facing are common throughout much of the economy these days, whether it’s cars, new homes or grocery stores running short on basics, such as toilet paper, because of surging demand and not enough workers.
Labor shortages are so severe that restaurants can’t get staff to fill all of their shifts, stores don’t have workers to keep shelves fully stocked and there aren’t enough truck drivers to move products across the country. Global ports are backed up with hulking container ships stuffed with furniture, clothes, toys and other goods consumers want.
While there are several factors to blame, much of it dates to the early days of the pandemic in March 2020 when the global economy was largely shut down in an attempt to limit the spread of the coronavirus, analysts say.
The result was predictable. The economy went into a quick and severe recession, falling by nearly a third. Fearful of being stuck with inventory, businesses slashed orders for equipment and supplies in hopes of being able to ride out what was expected to be a lengthy downturn.
Then the unexpected happened: One of the steepest, quickest downturns in U.S. history was followed by a snapback nearly as sharp, even as COVID-19 cases raged out of control.
Consumers, flush with cash from stimulus programs and extra unemployment benefits, but unable to go out to eat, get their hair cut or take a trip, poured their cash into their homes, quickly using the available inventory businesses still had.
“They shifted consumption away from services to stuff,” said economist Bill Conerly, in Portland, Oregon, who has written about the economy during the pandemic and who advises clients in manufacturing and finance. “They bought new drapes because they were hanging out at home. They put a gazebo in the backyard. We couldn’t do social activities. We had money in our pockets.”
Conerly used the Oregon lumber business as an example of what many businesses did in the early days of the pandemic.
They laid off workers, dragged their feet on hiring, reduced orders, conserved cash and prepared for the worst, he said.
“We’re going to be in trouble; let’s cut back,” was the attitude, he said.
Spending on home improvements that may not have been done until 2023 or ‘24 was pulled forward, putting stress on the supply lines. Many businesses in the lumber industry were caught flatfooted by the surge in demand, he said.
“They were surprised at people spending money and buying stuff,” he said.
Conerly said there is so much stimulus in the economy right now that businesses would be hard-pressed to keep up even if they had the workers.
“Every manufacturer I’ve talked to wants to increase production, wants to cut back on shipping delays,” he said. “They can’t keep their supplies and can’t keep people.”
Global supply strains, labor hurt Logan Monument
The global nature of the pandemic coupled with surging demand has put stress on the production and shipment of goods overseas.
Businesses have had a hard time getting orders, and U.S. ports are backed up with ships from China, South Korea and other exporting countries in Asia.
Boone said imports of granite monuments, including the popular deep black granites that come from China and India that normally arrive in four to six months, now take a year. Supplies of domestic granite that used to arrive in eight to 10 weeks now may take five to six months or longer.
Shipping costs have quadrupled, and one supplier has raised prices as much as 30% on some headstones this year, Boone said. That could add $1,000 or more to the cost of some headstones.
Boone said the industry has been told the shipments aren’t expected to get back to normal for at least another year, and maybe two.
There’s also a shortage of Mylar that is used for the stencils to engrave monuments. Logan Monument placed its typical order in January that normally takes two or three weeks before it is shipped; this year, that order didn’t arrive until July.
Boone said some of the blame is due to supplies being diverted to the manufacturing of products considered a necessity during the pandemic.
Even when normal production and transportation resume, Boone wondered how the company can catch up when it is so far behind.
Boone said suppose a company that normally makes 10 units is shut down for a week because of the coronavirus.
“When do you make up the work? Overtime? (Produce) 11 units a week?” he asked.
Production of granite headstones in India shut down for more than three months during the worst days of the pandemic, he said. Workers at those suppliers in India are typically dependent on public transportation, which also has been hurt by COVID-19, he said.
Production gets back up and running, but then the granite is stuck in customs because those workers are backed up as well, he said.
In the U.S., there aren’t enough truck drivers, so granite remains stuck on loading docks, he said. This was after quarries were shut down for months because of COVID-19.
“Every business is like this,” Boone said. “Everybody I’ve talked to has the same issue.”
When granite finally does arrive, there are more delays ahead, Boone said.
Cemeteries are having trouble getting and keeping workers, including those who set the foundations where the monuments sit, Boone said.
One cemetery, Boone wouldn’t say which one, hasn’t dug for a foundation since the pandemic began.
Parts shortages, shipping woes block delivery of goods
Many auto dealership parking lots are thin these days.
Much of the blame goes to a shortage of semiconductors — computer chips that can require a long lead time and that also are in growing demand in gaming, appliances and other sectors.
There have been shortages of other parts, too.
Anticipating weak demand for new vehicles, automakers canceled orders in the early days of the pandemic.
Other industries have had similar experiences.
Big Lots CEO Bruce Thorn told analysts on a conference call in August that shipping costs have quadrupled during the pandemic and that Vietnam, where segments of the retailer’s furniture and seasonal categories are sourced, has had temporary shutdowns because of COVID-19.
“These developments highlight the
fluidity of the situation and the ongoing uncertainties caused by COVID-19,” he told analysts.
“While these pressures are expected to be transient, they are resulting in both cost increases due to an imbalance of container supply and demand, as well as sales impact due to delayed inflow of product, particularly from Vietnam.”
The White House, in a report issued in June, expects supply imbalances to be corrected in a few months.
It noted the toilet paper shortage in the early days of the pandemic and how manufacturers reacted to fix that problem.
“Restarting the economy after a pandemic and a recession has not been and will not be simple,” the report said. “Hundreds of thousands of small and large businesses have to reopen, millions of laid-off workers have to find new employers, and manufacturers have to bring back production lines idled during the pandemic. Such changes take time.”
But a Wells Fargo & Co. report issued last week said supply chain issues “have gone from bad to worse” based on a manufacturing index showing factories having to wait longer for supplies.
“Ordinarily, a modest wait is consistent with a fast-growing economy,” the Wells Fargo report said.
“However, today it says more about the supply chain crisis. As if to put a big exclamation point on this issue, eight out of 10 respondents reflecting almost every industry type cited supply chain and sourcing problems.”
U.S. companies want to bring production back to the U.S. because of the struggles with imports, but that won’t happen overnight, Conerly said.
To Conerly’s point, last month a newly launched company called American Nitrile announced plans to convert a warehouse in Grove City into a factory to make latex gloves that were in short supply during the early days of the pandemic.
Where are the workers?
Through August, the U.S. economy had 5.3 million fewer jobs than it did before the pandemic began. In Ohio, there are 254,000 fewer jobs.
That’s despite the fact that the U.S. economy has fully recovered from the pandemic, while the Ohio economy is almost there.
Businesses blame the shortage of workers on generous unemployment
benefits and stimulus programs that put more money into the hands of consumers.
Consumer and labor groups say the labor shortage is more complicated — people worried about going back to work with COVID-19 cases still high, child care issues, rising retirements, burned out workers who say they need a break and a growing movement of people done with low pay, odd hours and a lack of basic benefits like paid time off.
A St. Louis Federal Reserve Bank study calculated that 25 million workers lost their jobs in March and April 2020 during the early days of the pandemic.
By June 2021, 15.6 million of them were back at work, 1.7 million were unemployed, and 7.7 million were out of the labor force.
The study’s model suggests that among those in the unemployed and out-of-the-labor-force groups, 3.6 million will return to the labor force by next June, leaving the labor force millions of workers below where it was before the pandemic struck.
The number of job openings hit a record 10.9 million in the U.S. as of the end of July, federal data show.
Meanwhile, 2.7% of all workers quit their jobs that month, also a record high. Workers quitting at that rate typically suggests they’re confident in finding a better job.
The pandemic has caused big shifts in the labor market, said Ben Ayers, senior economist at Nationwide.
“A lot of folks are reassessing what they want from a career,” he said. “There’s been a huge surge in startups. People don’t want to be beholden to a company.”
Others have retired, and parents may be holding off returning to work until they know their children will be in school for good.
Many are worried about being exposed to COVID-19 on the job and bringing it home, he said.
“We’re optimistic more people will come in,” he said.
“The extreme tightness many industries are experiencing right now will alleviate.”
Conerly said the labor shortage will improve, but like moving production back to America, it will take time.
Someone trained as a waiter may not want to take a job in a factory, he said. Spending that’s been pulled forward on goods will go back to being more focused on services that the U.S. economy typically depends on, and trendlines of workers retiring will go back to more normal levels.
That small group of workers who work only when they need money will return to work when they need money, he said.
“It’s bad for the economy; it’s not necessarily bad for the workers who left,” economist Bill Lafayette, owner of local economic consulting firm Regionomics, said of the labor shortage. “When supply drops and demand increases, wages rise or are supposed to rise.
“If employers aren’t pricing their jobs appropriately, then of course they struggle finding people.”
Lafayette said the bottom line is that no one knows for sure how soon these supply shortages and labor problems will be corrected.
“This is nothing like we’ve seen before,” he said. “That makes it very hard to predict.” mawilliams@dispatch.com @Bizmarkwilliams
“Every business is like this. Everybody I’ve talked to has the same issue.” Bill Boone, owner of Logan Monument