Workers at a fast food restaurant in Sacramento, Calif., Exasperated by working in sweltering heat for low wages, demanded more pay and a new air conditioner – and got both.
Orders poured in to an Italian auto supplier, which struggled to source enough of everything from plastics to microchips to meet demand.
A drought in Taiwan has amplified a global shortage of computer chips, so vital to automotive and electronics production.
The world economy had not seen anything like this for decades. Maybe never.
After years of ultra-low inflation, prices have skyrocketed in 2021 – at the grocery store, at the gas pump, at the used car parking lot, at the furniture store.
American workers, who fought for years for economic gains, demanded better wages, benefits and working conditions – and were ready to quit if they didn’t get them.
Global supply chains that had operated efficiently for years collapsed as factories, ports and freight yards collapsed under the weight of rising orders.
Powered by vast injections of government aid and the widespread distribution of COVID vaccines, the rebound in the global economy has been as surprising as the fall that preceded it. Policymakers were caught off guard both by the speed of the recovery and by the new COVID variants that threatened it.
Back from the edge
In the spring of 2020, the global economy was on the brink of disaster. The spread of COVID-19 has forced closures, scared people into hiding in their homes, crippled ordinary business activity.
In June of the same year, the International Monetary Fund predicted that the world economy would shrink 4.9% in 2020.
But the governments of the richest countries, marked by the slow recovery from the financial crisis just over a decade earlier, have invested money to save their economies. The United States has been particularly aggressive, providing $ 5,000 billion in COVID-related aid.
The stimulus helped avert disaster. The global economy contracted in 2020, but only 3.1%. The IMF now expects record growth of 5.9% for 2021.
From the start of this year, vaccines have accelerated the return to something closer to ordinary pre-pandemic life.
The uncertainty of the Covid
Yet the virus itself continued to complicate the recovery. Infections during the summer, for example, caused the Japanese economy to plummet: it shrank from July to September at an annual rate of 3.6%.
Likewise, the US recovery lost momentum once the highly contagious delta variant erupted over the summer. Growth slowed to an annual rate of 2.1% from July to September, compared to 6.7% in the April-June quarter and 6.3% in the January-March period.
Overall, however, the economy has recovered with surprising strength. In June 2020, while the economy was still faltering, the Federal Reserve forecast an average unemployment rate of 9.3% over the last three months of the year and 6.5% at the end of 2021. In reality? The unemployment rate fell from 11.1% in June 2020 to 6.7% at the end of the year. It is now 4.2%.
In some ways, this has been too good a thing.
Strong demand, especially for automobiles, home appliances and other physical goods, has overwhelmed global manufacturers. The factories could not get enough raw materials and parts. Ports and freight yards were inundated.
Supply chain problems were compounded by the unexpected – a drought in Taiwan that cut production at water-dependent computer chip factories, a deep frost in February that crippled petrochemical production in Texas , a huge container ship stuck in the Suez Canal and cutting off shipping between Asia and Europe.
Businesses were struggling with shortages of everything they needed, including workers.
At the Gotham restaurant in Manhattan, for example, patrons can’t find artisan chocolates, once a big draw for the holidays, or grab a burger or order oysters. Gotham couldn’t find enough employees to make the chocolates, grill or shell the oysters.
Across the Atlantic, MTA, an auto component maker that suffered Italy’s first lockdown in February 2020, reopened in a week and ended 2020 with surprisingly healthy business. But the recovery created new problems.
“Everything is missing,” said Maria Vittoria Falchetti, the company’s marketing manager. “Plastic is missing. Metals are missing. Paper is missing. Microchips – don’t even mention.”
South of Shanghai, Kaixiang Electric Appliance Co., which manufactures LED lamps and flashlights in Ningbo, paid 20% more in 2021 for labor, materials, and complications resulting from bottlenecks. ‘shipping throttle. “The current delivery time is around a month or two,” said Susan Yang, CEO of the 80-employee company.
The pain of high prices
Supply chain bottlenecks have driven costs up, contributing to a problem most rich countries have not had to endure in years: high inflation. The IMF expects consumer prices in advanced economies to rise 2.8% this year. This would be the highest rate since 2008.
Last month, consumer prices in the United States were up 6.8% from 12 months earlier, the largest year-over-year increase since 1982.
At a Mobil station in Yonkers, New York, Mario Bodden, a project manager at a nearby mall, said it cost $ 50 to refuel, instead of the $ 35 he was used to. “You start to think: am I going shopping? Do I have to fill it out today? Bodden said.
A shortage of made in America labor
Even absorbing higher prices, workers, especially in the United States, benefited from a tighter job market that allowed them to earn better wages and benefits.
The United States, in particular, has experienced severe labor shortages. At the height of the pandemic recession in the spring of 2002, employers cut 22 million jobs. When the economy rebounded, they rushed to recall laid-off workers – or find new ones. In September and October, employers listed a record 1.4 job openings for every American unemployed.
In Europe, on the other hand, governments have basically paid companies to keep workers on their payrolls, making “the reopening of economies in Europe much more transparent, as people just went back to their old jobs,” said Jacob Kirkegaard of the German Marshall Fund. the United States.
American workers have used their influence to demand higher wages and better working conditions. Frito-Lay workers went on strike in July to protest compulsory overtime. At Deere & Co., thousands of people went on strike in the fall and won 10% increases.
At a Jack in the Box restaurant in Sacramento, Calif., Workers quit their jobs to protest working conditions, including an air conditioner that constantly broke and forced them to work in 100-degree heat. In response, the restaurant installed a new air conditioner and increased wages by $ 1.25 an hour. “Every little bit counts,” said one of the workers, Leticia Reyes.