Businesses Are Still Getting Used to Growth This Fast

The economic story of the moment is clearly all of the shortages and bottlenecks popping up all over the economy. The latest new one is a shortage of sulphuric acid, which is used in mining copper.

One of the big themes here is that the mediocre growth of the post-Global Financial Crisis period has left much of the supply side in a state of atrophy. That goes for everything: chips, lumber, ships, you name it. 

Jon Turek, who writes the great Cheap Convexity newsletter, has a  post titled The U.S. Economy is on Fire, but it’s kind of a Mess Right Now, which really feels like the perfect way to describe things at the moment. Here’s his conclusion:

These supply issues don’t tell us very much about the medium trajectory of the U.S. economy, but they are enough to continue to push the Fed’s timing in terms of “substantial further progress.” The story for now is, the economy is on fire, but it’s a bit of a mess. This is likely a new era for aggregate demand in the U.S. economy, and for now, the supply side is still coming to grips with it.

Indeed, one of the hallmarks of the recovery strategy this time around has been the explicit bolstering of demand, during the acute phase of the crisis and in its latter chapters. This is new! And it’s clear that the supply side is, as Jon puts it, still coming to grips with it.

This morning we got the latest installment of the NFIB small-business optimism report. One of my favorite questions that they ask small business owners is what the single biggest problem they’re facing right now is, and it speaks to the dynamic above.

The number of businesses citing poor sales (white line) as their biggest problem has collapsed, while the number citing inability to acquire quality labor (the yellow line) is up dramatically from last year)

Businesses Are Still Getting Used to Growth This Fast

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