Note: The following content was produced by the Lewis Economic Development Council, which publishes a special section in The Chronicle monthly.
A shortage of computer chips is causing backlogs of such items as cars for sale. Businesses are having a hard time landing employees, some making more money on unemployment than a paycheck. Lumber prices are skyrocketing.
These are tough times for businesses as they position for an economic boom following the end of the pandemic.
Supply Chain Disruption
A lumber shortage is one prominent example of the difficulty in finding proper materials. And as the economy is poised to heat up, companies are being squeezed as they attempt to find proper supplies.
The problem started when the pandemic first hit in March of 2020. Manufacturers were staring at a drop in the economy, and started to shut down production. But the pandemic had other ideas.
People, stuck at home, started, for example, to take on home projects, from completing a deck to remodeling the basement. So instead of a lack of purchasing, materials flew off the shelves at places such as Home Depot. At the same time, the housing market has soared, with housing starts up 37 percent compared to last year.
The problem is that turning back on the means of production for those businesses in demand during the pandemic isn’t just a snap of the fingers. It takes $100 million and a few years, for example, to get a new saw mill up and running. The cost to build a new chip wafer plant is estimated at $3 billion to $10 billion. And again, the time delay in getting a plant up and running is years.
Today there seems to be plenty of jobs available for workers, but employers are having a hard time attracting employees.
“For hire” signs litter such spots as the Port of Chehalis and the Port of Centralia.
Part of the problem is unemployed workers receiving extended benefits in both time and dollars. The unemployment benefits have been extended into September, with a $300 weekly bonus on top of the regular unemployment check. Why work when you can get paid more for simply sitting at home?
At the same time, unemployment numbers are still at staggering heights. The pandemic caused massive layoffs sending the ranks of the jobless to more than 14 million. At the pinnacle of the pandemic, unemployment hit 13 percent. Since then there has been a recovery, but those in the jobless ranks remain significant.
The U.S. Chamber of Commerce stated it believes the high pay of unemployment is a major factor.
“Paying people not to work is dampening what should be a stronger jobs market,” the Chamber stated in a press release.
In response, many national companies are increasing their pay. Under Armour, which has an outlet in Centralia, just this week signaled they would be raising their minimum wage to $15 per hour. Companies such as McDonald’s and Amazon, for example, are increasing incentives and benefits to help bridge the worker gap.
Cascade Trader Inc.
Richard Lennox has been running his logging and construction tractor supply business out of Chehalis. He has about 50 employees.
Demand for his tractors and other equipment has been constant, Lennox said, but he isn’t always able to deliver what the customer wants. He said, for example, Kenworth, which builds semi-trucks, had 1,000 trucks built, but couldn’t deliver due to a lack of computer chips.
“It’s holding up the supply chain,” Lennox said of the shortage of computer chips. “In sales, when somebody wants something, they want it now. Sales go by the wayside and buyers lose incentive to buy.”
Lennox gets much of his highly regarded Doosan fleet of equipment via the Port of Tacoma. The stream of new equipment has been somewhat stalled due to supply chain disruptions that keep the tractors from completion. Lennox has even had a difficult time finding service trucks.
As far as employees, Lennox said if someone skilled in field services for tractors walked in his office, he or she would find a job waiting.
Robert Pehl is vice president of I-5 Cars, which has car lots in Lewis and Thurston counties, including its showcase building located along Interstate 5 in Chehalis.
He said his company has had some difficulties in bringing in new cars due to the microchip shortage, which was exacerbated by a Japan chip producing company catching fire. And even if he can find available imports, a lack of licensed semi-truck drivers makes it hard to bring them to his dealership.
He said COVID caused plants to shut down in Mexico, and an ice storm in Texas increased demand for undamaged cars.
“This has caused a huge shortage of cars,” Pehl said. “We are at all time lows on all of our lots, yet demand is strong. We’re still selling cars, but a lot are sold while still in transit.”
Some car buyers have to place an order and wait for weeks for the car or truck to arrive.
He’s also seeing a shortage of entry-level employees, similar to businesses across Lewis County.