Labor shortage hits supply chain hard

Businesses across the country are struggling to find workers, and transportation and logistics may be among the hardest hit.

U.S. job openings hit a record high of 8 million in March according to labor department data released Tuesday, but many companies are having a tough time finding workers to fill those slots; the data showed that job vacancies outstripped hires by more than 2 million during the month, the highest gap on record. The news came on the heels of Friday’s disappointing April jobs report, in which the labor department said employers added 266,000 jobs—far less than the roughly 1 million some economists had forecast.

The results paint a tough picture for transportation and logistics, which continues to roar back from the pandemic lows of a year ago but is struggling to find enough truck drivers and warehouse workers to meet surging consumer demand for everything from household goods to apparel and recreation items. The government’s preliminary jobs data for April showed that transportation and warehousing employment declined by 74,000 jobs during the month, following gains in February and March.

Mark Allen, president and CEO of the International Foodservice Distributors Association (IFDA), said the issue is especially acute in the food industry, which has bounced back quickly this year as pandemic restrictions have eased and Covid-19 vaccinations have ramped up. IFDA represents distributors that sell food and related supplies to restaurants, schools, hospitals, and other institutions.

“I don’t think anyone expected for our industry to come back as quickly as it did,” Allen said, pointing to a recent conversation he had with three large food-industry distributors that, combined, told Allen they need to hire 8,000 truck drivers and warehouse employees to meet demand. He said the industry has been feeling the pinch for drivers since the early part of the year, but didn’t see demand heating up on the warehouse side until mid- to late March.

Finding those workers remains tough for a variety of reasons, including the federal government’s expanded unemployment insurance benefits, lingering fears of contracting Covid-19, and the need for some workers to care for children who are still in remote schooling, Allen explained.

“My guess is there are a lot of things going on,” he said, adding that most business leaders point to expanded unemployment insurance as the biggest culprit. “Paying people to stay out of the workforce is not beneficial to industry.”

The federal government continues to offer $300 in additional unemployment benefits to workers sidelined during the pandemic, and although Allen and others say companies are increasing wages and offering other incentives to attract employees, they say such efforts often can’t compete with the stay-at-home benefits.

“Clearly there is a subset of America that, for whatever reason, has not reentered the workforce,” Allen said.

But there’s hope that some of these issues are only temporary. A handful of states have begun tightening reporting requirements to receive unemployment benefits and some have said they would opt out of the enhanced federal unemployment programs before they are scheduled to end in the fall. Some states are offering return-to-work incentives in lieu of the benefits. Allen said there’s a grassroots effort among IFDA members to support such state and local efforts to find “creative solutions to get people back to work.”

The retail sector is plagued by the same hiring concerns, according to Jack Kleinhenz, chief economist for the National Retail Federation (NRF). Retail jobs were down 15,000 in April, following gains in February and March, and employment in retail trade overall is 400,000 lower than it was in February 2020, according to the April jobs report.

Retail job openings continue to exceed hires, and Kleinhenz points to the same mix of reasons for retailers’ difficulty in finding workers—enhanced unemployment benefits, health and safety concerns, and so forth. He says the retail industry continues to “feel its way forward” by offering higher wages, where possible, adding that it will take some time for supply and demand to get back in line.

Like Allen, Kleinhenz says the rapid economic recovery from the pandemic is fueling much of the issue.

“There are a lot of positives, looking forward,” Kleinhenz said, pointing to the strength of the consumer economy as an example. “A year ago, you wouldn’t have thought things would come back so quickly.”