A team of reporters and commentators on the U.S. public radio network tried to answer a listener’s question last Friday: “President Biden has announced that from now on, the Port of Los Angeles will operate 24 hours a day, seven days a week. Why has it not operated 24/7 so far? “
They tried, in all seriousness, but did not succeed. It seems obvious that this question did not even occur to them. Well, well, journalists. But something much more serious was implied by the president’s dramatic announcement: this question did not even occur to him.
Cargo ship waiting outside and inside Long Beach Harbor in Los Angeles, this month / Photo: Reuters, MIKE BLAKE
The announcement of the acceleration of activity in the largest port in the US (9.3 million containers last year; extending along 70 km of the Pacific coast, over 32 km2?) Was given last Wednesday. It came in the midst of a crisis, which has two characteristics The most obvious are a sustained rise in the rate of inflation and critical bottlenecks in the supply pipes of the American economy.
57 ships in Los Angeles
The result of the shortened working hours at the ports of nearby Los Angeles and Long Beach (which account for 40% of US imports) is that unloading a single container ship now takes three times longer than before the Corona crisis. Everyone agrees that this crisis is the main cause of global traffic jams. But in Chinese ports, where 24/7 is the standard working formula, unloading takes only 20% longer than it did before the corona.
This means that each cargo ship must spend an average of 12 days near the Los Angeles docks. The number of cargo ships waiting to enter the port now stands at 57. This blockage of arteries is evident in department stores and supermarkets, car dealerships and electronics stores, it is slowing down online commerce, and it is about to cloud America’s spirit towards the end of the year holiday season. An immediate danger to the president’s political well-being now stems, by popular opinion, from the expected shortage of Christmas toys.
Missing toilet paper again?
The current shortage is not similar to the shortage in the first days of the Corona crisis, but this time too there is news of a shortage of toilet paper rolls. One chain, Bed Bath & Beyond, has announced that it is reducing its inventory by a fifth.
President Joe Biden / Photo: Associated Press, Evan Vucci
39% of respondents in the consumer survey at the end of September reported difficulties in purchasing paper products, including toilets; 43% reported difficulties in purchasing coffee, meat and packaged products; 34% on difficulties in purchasing a car; 23% on home appliances; 21% – furniture; 18% reported a shortage of electronics; And 14% on clothing.
In President Biden’s words, consumers are concerned about shortages, “from toasters through running shoes to bedroom furniture.”
What can a ship do in two weeks
These bottlenecks are evident not only in Southern California. They affect ports from Seattle and Tacoma in the northwestern United States, to Savannah in the southeast and New York and New Jersey in the northeast. Canada. An average of 15 ships are currently moored there (according to a report in the Seattle Times). Unlike in Southern California, Washington State ports are not going to switch to a 24/7 format.
A complete solution should overcome the shortage of trucks and working hands. Transport company executives blame the shortage on the federal government, whose generous unemployment benefits during the Corona crisis have left potential drivers in their homes. The turnover of drivers in transport companies reached 90% and more at the end of last year.
A ship carries between 10,000 and 21,000 containers. A manager of a large California transportation company told the Los Angeles Times that it now takes two weeks to unload the cargo of an average ship. Two weeks is the time required for a cargo ship to cross the Pacific Ocean from East Asia to the western United States.
This state of affairs will quadruple the cost of transportation from China to America compared to last year; Ten times as many as in the days before the corona virus. The result is large delays in the delivery of goods. A refrigerator or dishwasher purchased in the summer will be delivered to their buyers, at best, in early winter.
The blockages in China are “the worst in the world”
Although U.S. ports are the main casualties, bottlenecks are now a matter of routine away from the U.S. Dubai, for example, has banned imports from entering its international airport for six days, starting last Tuesday, to try and evacuate the “unusual amount” of. Goods accumulated in warehouses The emirate pays the price reduction of 30% of the labor force in the company that manages the cargo of the national airline Emirates.
According to the Financial Times, hundreds of ships are waiting in line at Hong Kong and Shenzhen ports, and “the blockages off the south coast of China are currently the worst in the world.” In all, by the middle of last week, 584 containers were waiting all over the world outside their destination ports.
“Snatch the punch bowl”
President Biden’s hand is too short to open the global blockages. It is not even clear to what extent it could affect the local bottlenecks. But it is quite clear that he delayed very much, to a degree not entirely understood. His conduct reinforces the impression of the failure of the leadership, which is charging Biden an exorbitant political price.
Bottlenecks are not just a burden on finding products in stores. They also fuel inflation. Official data showed last week that inflation in the previous 12 months to September stood at 5.4% – the highest rate since the subprime crisis, 13 years ago.
A survey from the institute quoted above, morningconsult.com, examined how the combination of prices and delivery issues affected buying habits last month. 64% of 18 to 34 year olds decided not to purchase because the prices were too high; Similarly, 59% of those aged 35 to 44. The percentages are lower over the age of 45. From these data arises a direct threat to the rate of economic recovery. And while economists are already predicting slower-than-expected growth next year.
The supply pipeline crisis calls into question two of the important assumptions of the last great economic tide, in the 1990s. Then came a surprise when the famous Phillips curve, about the link between full employment and inflation, did not materialize. Two explanations were then offered: the low cost of production lines in the Pearl River Delta in China and the new computerized ability to adjust inventory size, especially in small businesses, to actual demand, rather than estimated demand.
Well, the delta is no longer filling the demand, and the traffic jams at the ports of entry do not allow for inventory according to demand. Employment is returning to its pre-plague peaks, and inflation is soaring. Prof. Phillips returns to visit, and the question is what the central bank will do before deciding it’s time to “snatch the punch bowl in the middle of the party.” We have not used such clichés for 40 years, but they too, like Prof. Phillips, are considering a return visit.
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