From Boom to Bust to Shortages

Most of us have experienced the dramatic economic changes of the past few years. The “boom” economy, which was really only great for a select few, turned into a bust for everyone, again, except for a select few. Now that we in the US are struggling through a feeble recovery, the previous arrangements and relationships are being turned upside down.

The US recovery is being led by our export industries and the huge volume of imports of consumer goods from China is a fraction of recent peak levels. That sound good, doesn’t it? Here we are making export sales and importing less which will improve our trade balance and create jobs. But wait! Now we are being told that this situation has created shortages and bottlenecks. What’s going on here?

The first warning was a labor shortage on Southern and Coastal China. Many of the workers from these factories had been laid off and many factories closed as they were insolvent. These workers and the workers still employed who went home for Chinese New Year, did not return to their previous areas as they found jobs inland, or in other factories or stayed in their home areas as China expands it’s manufacturing base. The result in the south is a labor shortage. The next upheaval is a demand for higher wages now being played out in Chinese  automobile factories like Honda’s.

The latest “upside down” story is a shortage of steel shipping containers, known simply as containers. These are the wonderful 20 ft, 40ft and 45 ft steel boxes that have revolutionized international shipping of all kinds of goods and commodities. When the US was importing billions of dollars of goods in  of these containers each year there was a regular route and flow of containers from the orient to retail warehouses and back to the shipping ports to be returned to China to be refilled. That volume is way down and US exporters, who are mostly not located in large cities, are demanding export containers to fill. Instead, the shipping companies are stockpiling the containers or taking them out of service, because it costs too much to return them empty and the price to make new ones has risen significantly. The result is a shortage and another bottleneck to our retail recovery. I am sure there are experts who will read this and say that I have oversimplified the situation, but the result is the same and they don’ t know when it will be corrected