Baseball playoff fever is here, for those sports fans that are fortunate enough to have a team that is still alive. The Yankees and Cardinals were sent packing this week with their players added to the unemployment rolls. For those of us in the center of the country, we are down to the Brewers, White Sox and the Astros. As the Astros and White Sox are currently facing each other, we will be down to just two teams to root for shortly. I am betting the unemployment rate in Chicago to rise next week.
The supply chain continues to catch the attention of everyone. Tragically, last week we learned that one of the ships at anchor caught and dragged an underwater oil pipeline causing a oil spill that is currently being cleaned up. The number of ships continues to rise in all our ports as Asia, in particular, is producing near record levels of product now that they have reopened.
The issues we are seeing are not just with the production level of the economies overseas. While they have nearly returned to 2019 pre covid levels, the US continues to lag. The imbalance in production is one issue, another is our port business model. Our pre-covid model relied on unloading and loading ships typically over one shift a day. During peak seasons our ports were open to a second shift. The US also relied on a strong trucking industry to move the containers to their destination or an advanced rail system that would bring the products across the country. With foreign ports now working 24/7 loading ships there is no way the US is able to keep up. Between limited hours and limited staff at the ports along with a clogged trucking system, there is not enough capacity to move the product through the system.
The trucking industry is suffering from a lack of truckers, but also from unnecessary delays, back ups and inefficiencies in the core system. Truckers are waiting in lines, sometimes up to 6 or 8 hours, just to get into the ports or to unload at various warehouses. This is the result of two issues that exist. The first is administration issues, including a great deal of paperwork as well as inspections. The second is just not enough staff at the ports or warehouses to unload or assist with unloading. This leads to long delay times for truckers waiting to load at the ports. Hiring more truckers is not a solution when they just sit in a line waiting to get through the gates.
One argument is that the US needs to produce more, bring the manufacturing of products back to the US from overseas. A key point would be to add chip manufacturing capacity here, and I am not talking about potato chips, although adding more capacity there would not hurt my feelings. Naturally, this brings us to the jobs report that was released on Friday.
Somehow, somebody had expectations that the new jobs created would reach over 500,000. No idea where that number came from or how it could have possibly been achieved. The most recent report on job openings revealed there are just over 10,000,000 open jobs in the US that are currently unfilled. For mid September only 193,000 new jobs were created. The report says more about the worker pool than it does about business and what is being offered. Initially it was thought that more people would be entering the job market as the bonus unemployment benefits were expiring. This assumption appears to have been proven faulty as the labor participation rate in the report actually fell slightly to 61.6%. You have to go back to 1977 to find a participation level this low. As our society changed in the 1950’s to 1980’s with women entering the work force, the labor participation rate rose steadily, peaking in 2000 at over 67%. With the Baby Boomers retiring that number has been in steady decline for 20 years. Now we are facing another societal change. Many people of working age are re-assessing their lives and deciding to take a different path. This includes those who take a hiatus from working after saving up for a specific travel or life event purpose. They purposely decide to accept a lower, yet possibly more fulfilling life approach that does not include the desire to take a 40 hour a week job. Some of course are opting for taking advantage of various government programs and deciding on a lifestyle under these income constraints. Between the Baby Boomers retiring and now the first of the Gen X’ers retiring, the US will be experiencing a shortage of workers for some time.
The idea of moving manufacturing back to the US is likely of limited value. While many businesses would find it very profitable to produce products here, without a trained and available work pool, the only way this would work is with highly automated facilities which continue to be very expensive. That all said, one of the bright spots in the report Friday was that manufacturing payrolls increased by 26,000 which is a good sign.
After being in balance over the last two months, the oil industry is showing some interesting numbers. Oil rigs in the US continue to rise, reaching 533 rigs last week. This is just under half of the rigs that were operating in 2019. The growth of new rigs is slower than one would expect for how high oil prices are moving. The thought in the industry is that oil prices will climb as demand continues to increase faster than the supply. One thing is very clear from the numbers. Crude stocks rose rapidly in the last two weeks, filling storage tanks across the nation. However, refinery production appears to be falling off as refined product supplies declined this past week. Until the refiners start to ramp up production, we could see gas and heating oil prices climb through the Fall.
Have a great week.