Inflation Deflation

Welcome back to The Supply Times. In this issue, I’m addressing the hot topic of inflation, as well as a new trend of workers leaving their jobs to start their own ventures.

Industry Highlights: Inflation Deflation

Holiday spending is up double-digits over last year, but don’t expect it to get you as much. 

The Bureau of Labor Statistics reported consumer prices have jumped more than 6 percent this year—the largest annual increase in almost three decades. This has caused nearly half of Americans to report experiencing financial hardship, a recent Gallup poll showed. The same poll shows seven in 10 low-income families have felt the crunch of rising prices.

“Most low-income households are already hurting,” Gallup editor-in-chief Mohamed Younis told The Washington Post. “You can only imagine what that’s going to look like in the next few months if this continues to get worse.”

The rise in prices come as a result of the slow recovery owed to COVID-related shutdowns, as well as a disheveled supply chain, a widespread labor shortage, and the threat of impending COVID variants.

An interesting juxtaposition to this is a recent report from Bloomberg that states despite all the problems, American businesses have posted their largest profit margins in the past two quarters since 1950. According to new data from the Bureau of Economic Analysis, non-financial corporate profits are up nearly 15 percent—even with businesses paying employees 12 percent more than they did a year ago.

President Biden called the inflation a “natural byproduct” of the pandemic earlier this month, stressing that families are still financially better off than they were pre-pandemic. “As we continue to overcome these obstacles, the more price pressures will ease,” he said.

Personally, I don’t see this happening, especially since even Federal Reserve Chair Jerome Powell stated it’s probably time to retire the term ‘transitory’ when it comes to inflation. Even as unemployment declines and demand stays strong, rising gas and grocery prices will hurt consumers, followed closely by utility and housing bills.

The Future of Work - DIY Business

In the last issue, I described the prolonged talent shortage we’re facing, which has partly come as a result of shifts in employee priorities and values. For some workers on the job hunt, if they can’t find a position that matches their needs, they’re inventing the job themselves.

According to a recent Wall Street Journal article, the post-pandemic era has caused entrepreneurship and self-employment numbers to hit an all-time high, with a half-million Americans setting out on their own in the last year.

The Census Bureau reported 4.5 million entrepreneurs applied for tax ID numbers this year, which is up 56 percent from 2019—two-thirds of which were for businesses that reported they didn’t intend on hiring additional employees. And online marketplace Etsy reported a 53 percent increase of active sellers on its platform.

What does this mean for the market? In order for traditional companies to remain competitive for talent, they need to listen to what their prospective employees want. Candidates — especially those in Generation Z (18-22) — are more willing to forfeit the security of a conventional job and strike out on their own.

But some economists say the self-employment honeymoon will soon come to an end. Many families sharply increased their savings in the last year, giving them the safety net to start their own ventures. As those stores deplete, it’s likely these new entrepreneurs might seek stability in their old nine-to-fives.

As one who took the plunge almost a decade ago, I couldn’t be happier that I did. I recently spoke with a bright young man today contemplating this very question. My advice to him was that there's no such thing as the right opportunity or the right time. Do your due diligence and if the stars are aligned, go for it. If you work as hard as you did in your job, with unimpeachable integrity and work ethic, why won’t you be successful going on your own? Let’s see if I ever hear from him again.

The Supply Aside: What I’m Reading, Watching, Listening to, and Thinking About 

RE: Supply Chain, Work, and Beyond 

• Read: Facebook - The Inside Story by Stephen Levy. Even with all the coverage out there — not to mention their name change — this is a fascinating take on this controversial and insanely successful tech company. With three years of unfettered access to Zuckerberg and Sandberg, this is a comprehensive look starting from the company’s inception to the 2016 election. Dare I say, it’s almost meta. 

• Watch: The November ISM Manufacturing PMI numbers came out to a robust 61.1, showing signs of improving labor and supply chain constraints. These figures bode well for the manufacturing economy as it reaches equilibrium, while demand remains at high levels. Likewise, the consumption output side seems to be gaining strength, but backlog and manufacturing inventories are growing, as are prices.It will be interesting to see how — or if — the system will calibrate as we continue to slowly emerge from pandemic-related troubles.

• I’m also keeping a close eye on the job market. The Bureau of Labor Statistics reported Friday that U.S. employers added 210,000 jobs in November—well below the Dow Jones estimate of 573,000—while the unemployment rate fell from 4.6 percent to 4.2 percent. The labor force participation rate increased from 61.6 percent to 61.8 percent—the highest level since the pandemic started—but approximately 3.9 million fewer Americans are working today than February 2020.

• Listen: A podcast I’ve really been enjoying lately is a new one from Financial Times reporter Isabel Berwirk called “Working It.” It digs into trends like the hybrid work environment and the big challenges facing the workplace today. Each episode is 10-15 minutes long, which is perfect for my commute. 

• Think: While much has been made of the supply shortages plaguing us right now, I’m wondering what it looks like in the near future. Will today’s shortages become tomorrow’s gluts? Do we really understand how quickly we’ll get back to “normal,” and will it produce a see-saw effect on goods? If we do recover in the next few months, what does that mean for pricing and materials? All good questions we’re not quite ready to answer.

Thanks for reading. If you liked this newsletter, please subscribe below!

A quick shout out to another awesome newsletter I’m really enjoying lately: Katelyn Donnelly’s Obviously The Future. Every couple of weeks, Katelyn shares her thoughts on what’s happening in the world of work, offering insights on the changing workforce, and how to attract quality candidates. 

In her latest one she analyzed humanizing the enterprise as a topic. She discusses how talent is the only long-term competitive advantage and operational efficiency and technology processes have become tables stakes. One of the sharpest minds out there, this one is a must-read from Katelyn the Superstar. 

For the latest on supply chain opportunities, visit www.supplychainspark.com