(CBS Baltimore) – The economic turnaround continues as the country pulls out of the pandemic. However, the road to recovery was far from smooth. Bottlenecks and price increases for a number of products continue to plague consumers and are likely to persist in the short term. It’s another side effect of COVID, although economists predict it should improve over time.
The early days of the lockdown were marked by widespread shortages for certain key elements. Hand sanitizer, disinfectant wipes, and masks were high on the list as people sought protection from the poorly understood virus. The toilet paper, which was perhaps the biggest panic buy of all time, was also running out. The stores couldn’t keep any of it on the shelves. And then when the suppliers struggled to meet the demand, the stores couldn’t get them on the shelves at all. However, prices remained fairly stable, at least in large stores.
CONTINUE READING: Stimulus Check Update: Will You Get A Fourth Relief Payment?
Eventually demand decreased or supply increased to meet the increased demand. Or maybe both. People learned that the virus was mainly transmitted through the air rather than surfaces, reducing the need for disinfectants and wipes. Mask production increased as the pandemic timeline stretched further and further into the future. And toilet paper returned to shelves as panic buying subsided and stores replenished.
Other consumer goods became more difficult to find as weeks of lockdown turned into months and people adjusted to a new reality. Public indoor spaces such as gyms were forbidden. And social distancing limited capacity when they reopened. Even so, many people found it uncomfortable to return, but they still wanted to train. Hand weights were temporarily no longer to be found. Also bikes with people looking for a safe outdoor activity. Baking became a popular indoor distraction, resulting in a lack of flour and yeast. With distance learning the norm for school-age children, inexpensive laptops, especially Chromebooks, have become hard to find in the weeks leading up to the school year and during much of the fall.
Higher demand was a big problem. Gartner estimates that Chromebook shipments were up around 90 percent year-over-year in the third quarter of 2020 and 200 percent year-over-year in the fourth quarter. But increasing demand wasn’t the whole problem. The offer couldn’t keep up.
Chromebook makers might have met more of the demand if manufacturers hadn’t closed in the early days of the pandemic. And then there is the complicated supply chain that takes components from different places, puts them together into computers in China, and then ships those computers to America and everywhere else. Each of these suppliers likely experienced their own COVID-related slowdowns and downtimes, further constraining supply chains. US government sanctions against certain Chinese government suppliers also made matters more difficult.
Some versions of this supply chain story have caught on in myriad consumer goods across the economy and will continue until demand levels out and supply catches up. Recently reports have surfaced of shortages and rising prices for everything from chlorine tablets for swimming pools to boba, the tapioca pearls in bubble tea. The pandemic played a role in both cases. Home pool use in warm weather areas has increased as people are stuck at home. Supplies from Boba and the starch it was made from have lagged, as have many other supplies from Asia in a variety of industries.
It is unclear when things will return to normal. Bottlenecks and higher prices are influenced by a number of factors. Ori Heffetz, Associate Professor of Economics at Cornell University’s SC Johnson School of Business, explains, “You need manpower, supplies, materials, or goods [to make a product]. And you need capital. And then you need transportation. And most importantly, try to predict demand patterns. Production takes time so try to stay ahead of the demand patterns. The short answer is, this is work in progress. “
“We have bottlenecks in almost every one of these things,” continued Heffetz. “Workers, materials, goods, transportation, and the big business are forecasting demand patterns. I can point out problems with any of them. “
CONTINUE READING: Child Tax Credit: Parents Getting Monthly Check Soon, But For How Much?
Some of these problems are broad. Many companies from different industries report that there is a shortage of workers. A recently published disappointing job report for April supports these claims. Employers created 266,000 new jobs in the month, well below the 1 million expected. While 331,000 recreational and hospitality jobs returned, those gains were offset by losses in temporary employment, transportation and storage, and the automotive sector. Generous unemployment benefits help delay recruitment. Fear of an unsafe work environment, especially when it comes to social distancing and personal contact, also plays a role. A third factor is friction in moving, the changing needs of employers in terms of workers ‘skills and workers’ needs in terms of employment.
According to Heffetz, “part of it is the old story of workers who don’t keep up. Those workers who have lost their jobs in a restaurant are not hired again very quickly when they do something else. These are things that take time. “
As demand increases in much of the economy, so does demand for the raw materials from which things are made. “When global demand collapsed a year ago, we saw prices collapse, and now the world is coming back,” said Heffetz. “So strong demand, high raw material prices.”
Rising raw material prices and bottlenecks mean macroeconomic difficulties for producers to secure what they need to manufacture products. That could lead to Boba makers not having enough strength. It could also lead to computer and car manufacturers (and smartphones and many other modern devices) running out of microchips. Without this input, the production lines come to a standstill and employees lose hours. And for cars, this leads to higher car prices and fewer new cars for sale. Buyers then flock to the used car market and raise those prices too.
Difficulties in the supply chain also affect restaurants. Christina Gonzalez, owner of Taqueria Los Comales in Chicago, said, “Nothing has ever been quite as comparable to what we’ve just been through.”
“Chicken, meat, products, paper – everything that basically has to be transported with fuel has increased,” she continued.
Pick an industry and it will likely be difficult to resolve supply chain problems caused or exacerbated by the pandemic. A recent Federal Reserve report, which gathered comments from across the business community, identified “widespread supply chain disruptions” as a major driver of current business activity.
Businesses need to revitalize and retool their supply chains amid drastic changes in consumer demand patterns. COVID has changed the way people consume. And companies now have to guess where the demand for their product will be if everything comes to pass in the future. In a normal economy, that’s hard enough. In a pandemic emerging economy, things get much harder.
MORE NEWS: American Family Plan: What’s In It & How Could It Put Money In Your Pocket?
“This is not your usual recovery,” said Heffetz. “Recovery with possible long-term changes in demand patterns. And we still don’t know which things should stay here and which should go away. In addition to the usual things, we need to keep up with the rapidly recovering economy, but it is not quickly recovering to what it used to be, old prices, old stocks, old products and samples. We are returning to a post-COVID world. This will only take time, some think it will take a long time. “