The Pandemic Economy
The job losses and hit to the service sector is well documented. But trade has radically shifted, too.
An interesting read in the New York Times about the ways COVID-19 has disrupted the global economy. It’s a long piece but the essential issue is this:
Around the planet, the pandemic has disrupted trade to an extraordinary degree, driving up the cost of shipping goods and adding a fresh challenge to the global economic recovery. The virus has thrown off the choreography of moving cargo from one continent to another.
At the center of the storm is the shipping container, the workhorse of globalization.
Americans stuck in their homes have set off a surge of orders from factories in China, much of it carried across the Pacific in containers — the metal boxes that move goods in towering stacks atop enormous vessels. As households in the United States have filled bedrooms with office furniture and basements with treadmills, the demand for shipping has outstripped the availability of containers in Asia, yielding shortages there just as the boxes pile up at American ports.
Containers that carried millions of masks to countries in Africa and South America early in the pandemic remain there, empty and uncollected, because shipping carriers have concentrated their vessels on their most popular routes — those linking North America and Europe to Asia.
And at ports where ships do call, bearing goods to unload, they are frequently stuck for days in floating traffic jams. The pandemic and its restrictions have limited the availability of dockworkers and truck drivers, causing delays in handling cargo from Southern California to Singapore. Every container that cannot be unloaded in one place is a container that cannot be loaded somewhere else.
It’s amazing that we’re a year into this thing and yet the economy hasn’t come close to adjusting. The fact that so much of it is dependent on China is a key problem. That’s really the key takeaway from the article, with shipping containers as a proxy for the bottleneck.
Adding to the burden is that we’ve radically changed our lifestyles—for who knows how long—transitioning from our homes being where we spend our evenings and weekends to them being where so many live 24/7. In the early days, that led to massive shifts in how we consume mundane things like toilet paper and paper towels. In the months since, though, it’s led to huge spikes in demand for home office furnishings, home gym equipment, and various home renovation projects for which the supply simply can’t keep up.
There are also strange ripple effects:
Most airfreight is carried in the cargo holds of passenger jets. With air travel severely constrained, so are available cargo slots.
Hopefully, we’ll see a return to some parts of normalcy once vaccinations take hold and something like herd immunity is achieved, likely in late summer or early fall. But, of course, that’ll require a readjustment as well.
I’m not as sanguine as you are, James. I think, for example, that it will take a very long time for the leisure and hospitality sector to recover to where it was in 2019 if ever. In 2019 that sector employed more workers at minimum wage or below than all other sectors combined by a considerable margin.
@Dave Schuler: I do wonder if some sectors, notably cruise ships and movie theaters, will ever come back to anything like they were. And, while I don’t think everyone is going to stay working at home, there will doubtless be a significant shift in office culture given 1) how expensive commercial real estate space is and 2) the relative efficiency with which people work from home, dispelling most of the concerns that they would slough off absent physical supervision.
I can vouch for the supply chain problem. Every week my purchasers are calling about some component that is now on a 40 week back order.
@Dave Schuler:
The biggest impact on the travel and hotel industry is likely to be the decline in business travel. The Covid-19 lockdowns have made meeting via applications like Xoom and Skype have made communication with potential cusmunicating with potential and potential and actual clients possible without leaving your desk oeven your office. This is likely to be less willing to assume the cost of international and long distance travel.
By July we’ll be hearing complaints of crowded airports, lack of hospitality employees and skyrocketing prices for flights and hotels. I think restaurants will come roaring back in May, air travel ditto by mid to late summer. The pent-up demand is insane. Katherine and I are planning 2-3 months in Europe on top of family-related travel to the Bay Area and Richmond, VA.
The trouble spot will be business travel which will likely never fully recover because cheaper work-arounds have been found.
Thursday, I spoke with the GM of a company where I once worked and he was bemoaning supply chain issues, both in new products and repair parts. In 30 years in the business, he’s not seen anything like it. The supply chain issues will work themselves out, but the travel and leisure activities industries are dicier.
@James Joyner:
Open plan offices have lasted for decades despite a tsunami of empirical studies showing they reduce productivity and make lives worse for workers. Because for all the mythology about business people being ruthlessly efficient, the fact is most of them go by their gut instincts and ignore any contrary information.
And most of them don’t trust their employees and will insist they come back to the office because whatever the data says is actually the case, they’re convinced their employees can’t be productive without a manager sitting their washing them.
It’s the same way the guy who always came in early and leaving early was seen as less productive even if they were putting in more hours, because the manager’s gut told them that the guy they saw staying later must be the hardest worker.
@Stormy Dragon:
That should be “watching them”. If your manager insists on washing you, please call HR immediately.
@Stormy Dragon:
Old habits and assumptions die hard, but they do eventually die when the economic logic becomes compelling enough. I bitched for years about the economic idiocy of ‘book tour,’ wherein I’d be flown to Arizona or Cincinnati to do a school visit and a bookstore event that moved a dozen books for the $1000 a day it costs to fly me, hotel me, feed me and cover my bar bill.
Then, suddenly, hosannah! they realized it was stupid. And now I’ll never have to go to Ohio again.
It won’t take much of a drop-off in on-site employees to crash the commercial real estate market.
I think the jury is still out on this one. A lot of us dug in and worked hard to minimize the impact of everyone needing to work from home, but I think the initial team spirit and crisis response is wearing off. I would not be surprised if people working from home are being significantly less productive so far this year than they were last summer. And I think part of that is that virtual recruiting, hiring, and onboarding just suck.
My company is building a new headquarters building at the moment. That was already underway before the COVID hit, but there are no plans to have anything less than all of us back in one physical location by 2022.
@Stormy Dragon:
That’s funny; everywhere I’ve ever worked it was the people who get in early in the morning who were assumed to be the hardworking go-getters, and the people who arrived later and stayed later who were assumed to be lazy slackers. My father fought that for his entire career. He worked longer hours than his colleagues, but many of them came after the boss had left for the day, and were thus invisible.
@DrDaveT:
Well, I guess you don’t want the boss to see you arriving or leaving. The point still being that it’s tied to your visibility to your manager, not how hard you work by actual measurement. =)
@DrDaveT:
And if you work after the boss leaves, the key is to make sure you send some e-mails before you go, so they can see how late you were working. And I guess if you come in early, send some e-mails as soon as you get there. =)
Shortages have also been demand-driven and are not merely an international supply problem. The list of items with surged demand over the last year is pretty significant.
What’s remarkable is how unequal the economic effects of this pandemic and the federal and state government response have been – brutalizing some sectors and making other sectors flush with cash. Many wealthier white-collar Americans are investing heavily into home improvement for example. Home Depot’s sales in 2020, for example, increase by 20% over 2019. And they were deemed “essential” everywhere so were able to capitalize. Other examples: Costco sales were up about 10%, Target 20%, Walmart only 6%, Amazon 38%.
It will be interesting to see what future analysis shows about the effects of the federal government throwing money at pretty much every American whether they needed it or not. Those massive increases in sales didn’t just materialize out of thin air. Some of it was, no doubt, transferred from other priorities in household budgets. If you like, for example, to dine out a lot or go to nightclubs and can’t, you’ll probably spend that money somewhere else. Adding in the federal money, especially for people like me who didn’t need it, doesn’t change that. Instead of doing what I’d do in a normal year with a bunch of free government money – travel – we instead bought a hot tub. Which is something a lot of people are doing because demand is so high we won’t actually get our hot tub until this summer (and hot tubs aren’t made overseas).
So I’m betting that a lot of that “free” money did not help the employers and businesses who were actually negatively affected by Covid, especially small business, and instead just made all the big players stronger.
@Stormy Dragon:
I had a job at one of the big Wall Street firms, and we were all supposed to be there at 8:30. My boss would come in around 10, and I strolled in around 10:15.
One day, he pulled me aside and explained that I had to be coming in by 9:45. If I came in late, but before him, I was just pulling one over on him, and that was fine. If I came in after him, I was being visibly insubordinate, and that caused problems with team morale.
His boss came in at 10:30, which is why he came in at 10:15.
@DrDaveT:
The company I work for now was beginning to remodel to fit more desks in, but is now changing course with an expectation that fewer people will be in the office on any given day.
That said, they do seem to have declared a war on productivity in so many ways that I expect this to also be a fiasco. Trying to summarize what I’ve been doing while updating my resume led me to write “My team hasn’t done shit for the past year, which is why I am leaving.” — I may have to rephrase that.
@Gustopher:
If the impact on team morale for a 15 minute difference in when one low level employee arrives in the morning is significant enough to be worth knowing, it was already in the crapper to begin with. A fly landing on a scale only makes a significant change in reading if the scale was nearly empty to begin with.
@DrDaveT: As I manage my own firm (multi-country, multi-office), this is my observation. Initial reasonable work-from-home performance has substantially deteriorated.
What is sustainable on an emergency basis is less sustainable on the long-haul (from home life as well as ability to interact with colleagues in a more fluid way).
That said, it seems to me flex working is confirmed as a useful option.
@Michael Reynolds: Some degree of business travel will return – I am confident of that as frankly on deals, and development, doing Zoom or Teams over choppy internet and variable connections is in no way as effective as getting people together to discuss and hash out. The body language, the fluency of exchange… We remain social primates and video conferences are not a full substitute.
We are just about a week away from the first anniversary of the day the world changed. On 3/16/20
it was the sports world that gave us the first indication of what was to come. In a few short hours we saw the first cases in the NBA, I believe it was the Utah Jazz that saw a spike in among its players. This led to a swift response from the NBA to shut down, a move that led to the last few games of the season and the playoffs and finals in a bubble. The NHL ended up following the bubble plan. NCAA Conferences shut down all Conference Tournaments and March Madness.
Within days, businesses to do shutdowns of their own and Governors across the country put their states on shutdown status with some states issuing “Stay at :Home:” orders that applied to everyone who wasn’t considered an essential employee.
What a year it has been.
@Lounsbury:
I’m absolutely convinced you are right. Yes, COVID has sped up the process of working out ways people can work at home in a big way, and it’s fair to say a lot of that is here to stay, but it carries significant drawbacks.
We have an area we call The Bullpen. It’s a large office with minimal cubicle-ing, containing 10 desks. We deliberately ran all the newbies through there, keeping a diverse core of experienced hands in the room. The cross-communications between generations was extremely useful, anyone with a question merely had to speak up and somebody in the room would know the answer 90% of the time. The young are better at tech, the old know the biz. There is no replacing that kind if instant, easy communication through Zoom or Teams.
@Stormy Dragon: Insubordination undermines his authority way more than the 15 minutes. He was right about that.
Steal from the company, but have the respect to not do it in front of the boss.
Morale was in the crapper, because there were layoffs every few months and the grand boss was a racist asshole. “Don’t make my job harder” is a reasonable request when it means “show up no more than an hour and a half late rather than up to two hours late”
The layoffs were fun. There were so many people who had given up on working that there were lots of people to chose from, but if you laid them all off now, they didn’t count towards the next round. “Say, Gus, between these three people… is there any reason to keep any of them?” “X and Y spend all day playing chess, so they should go together, as a bored angry man is trouble.” ‘Well, we’re only getting rid of one this time… so Z it is!”
The shoes I wear every day I falling apart to the point they hurt my feet. I am now searching for the identical shoes online rather than going to a store and trying on 12 different pairs of shoes.
I think there are going to be all sorts of weird shifts like this in buying patterns. And the incidental purchases are probably way down.
(They’re not very stylish shoes, but they fit well. And it’s hard to find anything in 14 for someone who has feet shaped like a duck’s, wide in the front with a narrow heel)
(You know what they say about men with feet shaped like a duck’s… anyway, it’s entirely false, there’s no insane corkscrew thing with barbs in my pants)
@DrDaveT:
I was always a night-shifted person. I could accomplish more between 5 and 8 than I could during normal business hours. 3 hours uninterrupted is equal to or greater than 8 hours of compromised work flow.
One crunch week I worked 112 hours. I had to. My task list required it.
Pro-tip: send the “I did what you asked of me” at 11pm or 1am to your boss and cc their boss.
My normal peak performance time is evening. Corps cannot accommodate that. Roughly 15% of workers are like me.
@Gustopher:
Did the Doc’s do you poorly?
Btw, most folks nowadays don’t care if you sport less than what was once considered “professional” footwear.
The old shibboleths on professional presentation are, if not dead, pretty near so.
Professional action is much more prized than a stupid fucking dress code.
I expect I will never wear a tie again except at a funeral.
@Lounsbury: I’ll be quite surprised if, say, Japan ever decides to get rid of physical meetings. It’s just not done in that culture. And if you’re trying to do something internationally–well, for a while Japan will maaaaybe put up with Skype meetings for a while (particularly when communicating with people from a country that hasn’t managed to control Covid) , but at some point they’re going to want to sit down with you across a table and discuss things. It’s just much more comfortable for them. Until we get high-quality 3D holographic virtual reality meetings available, forgettabaht anything else.
@DrDaveT: @Stormy Dragon: My situation was that, as an hourly night shift worker, if my boss saw me when he came in (at 5:30 am) it meant that I had been working overtime for almost 2 hours already. When I switched to starting at 3:3o–about when he left to go home most days, seeing me again at 5:30 made him almost apoplectic because I was on double time by then.
Interestingly enough, seeing the reports that I’d been working up to 60 hours a week didn’t trouble him anywhere near as much as actually seeing me there did. I always figured that it was the immediacy of seeing the 150%/hour pay rate live and in person that triggered the reaction. He was pretty sanguine about wages in the abstract.
@Andy: Undoubtedly, being single and retired make a difference, but in my case, sheltering in place has led to my spending significantly less money overall. Before the pandemic, I’d had some expenses that had taken a couple of thousand dollars out of my basic checking account. Even though I’ve not been working for almost a complete year and hadn’t used employment income (which I save for travel and investment) to reimburse my checking after the large expenditures, my checking balance is larger now than it had been when I paid those bills. I have to assume that I’m spending less overall.
@Lounsbury:
I hope so. We generally travel Business Class and I need all those exec types to subsidize my travel.
@grumpy realist:
Hollywood is a kiss-kiss culture but they seem to have adapted quite easily to Zoom world.
Personally we are quite happy to see the decline in face-to-face meetings and the end (fingers crossed!) of all the air kissing. We can either waste 30 minutes on a Zoom with some exec, or we can drive into the city, park, meet, retrieve the car and drive home, which turns a 30 minute waste of time into a two hour waste of time.
And school visits, OMG, forty-five minutes on Zoom compared to get to LAX, fly, rent car, hotel, 6 AM wake-up, get lost, sign in to some school like you’re a criminal suspect, chat, be ‘shown around’, more chatting, finally 45 minutes talking to a hundred bored kids, then more chatting, then gifts we can’t fit in suitcases, then drop off rental car, fly. . .
This last year has been the world becoming much more like us: delivered groceries, pharmaceuticals, booze, meals, cigars and weed. Our productivity has not been at all lessened. The big drag (and it’s a decidedly first world problem) is that we like to sort of punctuate work by traveling a bit between books.
We want a world where it’s safe to fly to Portugal, but we can’t possibly be asked to fly to Michigan.