Tag Archive for: Midwest Economic Forecast Forum

By Kurt R. Bauer, WMC President and CEO

Last year in this annual forecast, I predicted that the COVID-19 vaccines would ease the stranglehold the virus had on the economy. I also predicted that then President-elect Joe Biden would govern to the political and economic left of Barack Obama. I think both predictions have largely came to pass. But even with the vaccines, boosters, and therapeutics, COVID-19 will still cast a foreboding dark cloud over the economy in the New Year, as will the Biden Administration’s policies.

There is a cause and effect for everything. COVID-19 caused state governments to order the first ever large-scale shut down of huge swaths of the U.S. economy. That caused a recession and businesses responded by cancelling orders for goods and services that ultimately impacted critical links in the U.S. and global supply chain.

At the same time, the federal government was passing massive, multi-trillion dollar COVID relief packages that stimulated consumer demand for just about everything once the worst of the pandemic appeared to be over. But the damage had been done.

Plants throughout the world that make the things we want — from cars to refrigerators — or make the things that go into the things we want — from microchips to steel — had slowed or idled production. Resuming pre-COVID production levels to meet the sky-high demand isn’t as easy as flipping a switch. And even if factories could keep up with demand, the transportation system that delivers those goods to market couldn’t. That includes shipping, rail, and trucking.

It’s like what happens when there is a car crash on a busy multi-lane highway during rush hour. Traffic slows to a trickle while the accident is cleared. And even after all lanes are reopened, it takes time for normal flow to resume. COVID is the car crash. The highway is our economy. And traffic is the supply chain.

Two other major “effects” caused by the pandemic are workforce shortages and inflation.

On workforce, far fewer Americans, including Wisconsinites, are working today than pre-COVID. Some of the federal stimulus is to blame, especially the American Rescue Plan passed last spring when the economy was already on the mend. Incentives matter and when you pay people not to work by supplementing state unemployment benefits, don’t be surprised when some don’t. The good news is that job numbers from late last year appear to show people returning to work, albeit slowly.

And all the trillions of dollars in federal stimulus compounded by more demand for goods than supply is causing inflation, and it doesn’t appear to be “transitory.” For example, wage inflation is certainly not temporary. Wages and benefits are rising because of the labor shortage and, unlike the price of groceries, the cost of hiring is unlikely to drop. We are setting new baselines.

Energy is similar. I don’t see energy prices dropping any time soon because of the anti-fossil fuel policies of the Biden Administration. Alternative energy is much more expensive to produce than energy generated from domestically produced fossil fuels. Alternative sources are also intermittent and not easily stored. And rising energy prices at both the pump and for home heating are very regressive. That’s why economist Thomas Sowell calls inflation “the most universal tax of all.”

What could make it all worse is President Biden’s proposed Build Back Better (BBB) budget reconciliation bill, which at press time has passed the U.S. House, but not the Senate. There are many things to dislike in the $1.75 trillion package, including raising individual income taxes. But every Wisconsinite should know that the BBB package passed by the House includes $280 billion in tax relief intentionally targeting millionaires and billionaires in “blue” states, like New York, New Jersey, California, and Connecticut.

Other BBB provisions will add more mandates, entitlements, disincentives to work and regulations that will raise the cost of doing business in every major category. Typically, you don’t respond to a major national crisis that led to a recession by raising taxes and adding other expenses on the private sector.

All of the above is creating paralysis and uncertainty. Businesses can’t find workers. They can’t get components. They can’t ship products. They don’t know how much their taxes will go up. They don’t know how high energy prices will go. They don’t know how many new entitlements they will be mandated to provide employees. They don’t know how many employees will quit if the vaccine mandate goes into effect. And they don’t know how governments around the world will react to new COVID-19 variants, like Omicron.

The bottom line is that COVID-19 made the economy sick and government is making it worse.

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Founded in 1911, Wisconsin Manufacturers & Commerce (WMC) is the combined state chamber of commerce, state manufacturers’ association, and state safety council. With nearly 3,800 members, WMC is Wisconsin’s largest business association representing employers of all sizes and from every sector of the economy.

By Brandon Scholz, WGA President & CEO

More than 22 months ago, the grocery industry was thrown right into the middle of the COVID-19 crisis before we knew it was a crisis and eventually a pandemic. Immediately, grocers were essential businesses and workers, and their job was to make sure people had access to food.

And they did their job despite mandates, masks, COVID-19 restrictions on employees and customers, a struggling economy, product shortages, workforce challenges, and more.

There was never a time to slow down and catch up, only opportunities to fine tune what was already a well-oiled grocery store machine.

But no matter what efforts grocers, convenience stores, and other retail food operations did during multiple transitional periods, there was always another obstacle when one problem was resolved!

The industry started to experience even greater challenges with shortage of products on the shelves, low inventory and incoming short orders — even worse than what was experienced during the pandemic.

Contributing to the growing angst of inventory shortages and not-quite-fully-stocked-shelves was the hyperactivity surrounding various CPI and rising inflation reports. And no tale of woe was complete without a dissertation on the patchy workforce in almost every business up and down Main Street, but especially in grocery stores across the state.

To top it all off, consumers started to hear about the problems with the supply chain whether it was getting products to the grocery store, making cars and trucks, or containers stacked to the sky’s in ports across the world.

Seriously, I have never heard so many people talking about the “supply chain” in the grocery industry as I have in the last four months.

For many, it’s an eye-opening moment coming to understand how food and products actually get on grocery store shelves. For others it’s the boogeyman that’s keeping the grocery biz from returning back to normal. As one WGA member said, we always took the supply chain for granted: it was efficient and effective.

Whatever that level of understanding is, it actually is a helpful teaching moment when we’re talking with the media, legislators, regulators, and others explaining what the grocery industry was going through in 2021 as we moved from the 2020 COVID-19 outbreak to the pandemic and now to an endemic with possible surges, mutant variants, and other unforeseen challenges.

As the pandemic, and now the endemic continue to be a daily part of our society, most experts say the industry is a ways away from store shelves returning back to “normal” and stocked to shopper’s pre-COVID expectations. To correct the imbalance, labor and workforce challenges, transportation/manufacturing/production constraints all have to be resolved.

As we forge ahead into 2022, there are a couple of things to keep in mind. First, we do not have a food shortage in this country. We have a challenge producing food and getting these products onto store shelves. Every component of the supply chain is involved in working to bring the system back to pre-COVID levels.

Second, yes, inflation is higher than it has been. But reports of grocery price increases across the board are not true. Yes, there are price increases. Yes, there are price increases greater than what we have seen in the past. But no, these price increases are not “across the board” that capture every product in the store. Pricing strategies are strategic; they are not haphazard.

Grocers work exceptionally hard to control price increases that are forced upon them as they receive products for their stores. Raising prices is one of the last steps a grocer takes. Shoppers are savvy and shop on price, quality, and service. Raise prices and customers know it.

As some point out though, grocers can’t fully absorb the price increases from the supply chain. Those price increases get passed on to consumers, but not until the grocer has run out of room to absorb those costs.

Looking back as we pulled out of 2020 and into 2021, we saw changing and evolving issues and challenges resulting from the initial COVID outbreak and how it ultimately affected the supply chain.

No doubt, that means we will continue to educate shoppers, the media, and others as to why grocery store shelves don’t look like they did before March 2020.

Moving forward into 2022, grocers will continue to manage the pandemic and deal with these challenges ahead. We need the government to stop issuing mandates and let grocers run their businesses. We need people to come back to work, not just for a job, but for a career.

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The Wisconsin Grocers Association represents nearly 1,000 independent grocers, retail grocery chain stores, warehouses and distributors, convenience stores, food brokers and suppliers. Wisconsin grocers employ over 50,000 people with more than $1 billion in payroll and generates more than $12 billion in annual sales in Wisconsin resulting in approximately more than $800 million in state sales tax revenue. wisconsingrocers.com.