Despite the apparent absence of summer here, market traders still seem to be on holiday. While Afghanistan continues to dominate the headlines, bubbling in the background is a story of more relevance to investors: labour shortages and supply chain disruption. The two are, of course, inextricably linked. Part – but by no means all – of the reason for empty supermarket shelves lies with an absence of sufficient lorry drivers to shift goods around the country. But there is more to this problem than just a shortfall in those trained to drive HGVs.
While too few relevant workers will naturally feed into problems with transporting goods, it is not the only reason that supermarket bosses are warning that some Christmas supplies could be at risk. In agriculture and food production, a lack of people to help with the harvest or prepare poultry has become a real problem. It is estimated that some 70,000 seasonal workers are needed to help with the harvest. Many would have come from Eastern Europe, but a combination of Brexit and the pandemic has kept them at home.
The knock-on effect for markets is the potential this disruption has to slow our economic recovery. Concerns that this is already happening have led to profit-taking in the domestic equity market and an end to sterling’s recent surge, but this is not just a domestic issue. Recent figures from emerging economies suggest that growth is being restricted by labour shortages due to the pandemic and reduced ocean freight, which has been impacted in a similar manner to lorry freight.
By and large, markets have shrugged aside these issues, perhaps in the belief that they are only temporary. Certainly, if they persist, we will need all our ingenuity to find ways around the problems that have been created. It may be that wage rates in some sectors of the economy will be forced up as a result, which may place further pressure on inflation. There is evidence that lorry drivers’ wages are being pushed higher in an effort to persuade more people to take the necessary training, but it will be some time before we learn if these measures have had any real impact.
There is usually a silver lining to any news story with a likely negative outcome. It is perhaps naïve to expect all of those who lost their jobs during the pandemic to flock to those areas of the economy disadvantaged by a lack of overseas workers, but some easing of any unemployment surge resulting from the ending of furlough should take place. There could well be some levelling up in the wages that apply to some of these less well-paid jobs – good news for some, even if it could result in some prices rising. Let us hope the positive outcomes outweigh the negative.