A24 EZ RE THE WASHINGTON POST.SUNDAY, MAY 29 , 2022
Other factors that could constrict
supplies and push up prices lie
beyond the control of the central
bank, including fallout from the
war in Ukraine and harsh lock-
downs in China to arrest the
spread of the coronavirus.
Over the past year, the prices of
durable goods have risen by
14 percent while the cost of ser-
vices has increased 5.4 percent,
according to the Bureau of Labor
Statistics.
A shift to higher services spend-
ing might also reshape demand
for labor. During the pandemic,
the goods producing and trans-
porting sectors have outshone
services. The online retail surge
added almost 675,000 warehouse
workers. Factory employment has
just about regained its February
2020 level while employment in
industries with direct consumer
interaction, such as hotels and
restaurants, remains depressed.
Almost 1.5 million leisure and
hospitality jobs that existed in
February 2020 have vanished, ac-
cording to the Bureau of Labor
Statistics. The Federal Reserve is
expected to continue raising in-
terest rates by half a point at each
of its next two meetings in a bid to
slow consumer price increases.
With almost two job openings for
every seeker, there is room to cool
business hiring without eliminat-
ing existing positions.
“There will be a rebalancing of
demand for workers. But I don’t
necessarily look for large layoffs,”
Bostjancic said. Indeed, the shift
in consumer preferences has been
gradual.
Even as consumers change
their buying plans, Ta rget is or-
dering earlier than usual to make
sure it has the right goods in stock
to satisfy demand several months
from now. Such precautionary or-
dering, designed to stay ahead of
congested supply chains, helps
keep them congested.
In Las Vegas, meanwhile,
Parikh is waiting for the conven-
tion crowds to return. While
monthly tourist traffic is about
10 percent below 2019 levels, at-
tendance at industry conventions
remains more than 40 percent
lower than three years ago, ac-
cording to the Las Vegas Conven-
tion and Visitors Authority.
“We want that convention traf-
fic to come back,” said Parikh, who
expects to break even this year
before returning to profitability in
2023.California, which tracks vessels
entering the top import gateway
in the country.
Given the lag between when
American companies place orders
for imports and when the goods
arrive in Southern California, it is
not clear these changes reflect
shifting consumer tastes, accord-
ing to Gene Seroka, executive di-
rector of the port. Goods arriving
in Los Angeles this week were
ordered three to four months ago,
he said.
But Seroka does anticipate an
easing of import volumes this
year. At some point, accelerated
goods purchases exhaust poten-
tial demand. Consumers who
bought a new refrigerator or re-
modeled their homes last year w ill
not do that again this year. “You
will see a little bit of a leveling,
maybe a tempering, of imports
and then more into the services
sector,” he said.
That kind of shift could con-
tribute to an easing of inflationary
supply chain disruptions that the
Powell says have been “larger and
longer-lasting than anticipated.”be starting t o affect supply chains.
Demand for trucking has dropped
by about a third since the begin-
ning of March, though it remains
elevated, according to the market
demand index at Truckstop.com.
Jason Hilsenbeck, president of
Load Match, an equipment clear-
inghouse in Illinois, said the drop
in demand is hitting new entrants
to the short-haul trucking busi-
ness. More than 2,500 new opera-
tions with one to two people en-
tered the market since early 2021,
hoping to capitalize on elevated
freight demand, he said.
“The small trucking companies
who made a killing last year o n the
high-paying spot market are the
first not to have loads when the
freight volumes come down,”
Hilsenbeck said in an email.
The number of imported ship-
ping containers reaching the Port
of Los Angeles has been below its
figure last year for seven straight
weeks. On Friday, the backlog of
container ships loitering offshore
numbered 25, down from a r ecord
of 109 in January, a ccording to the
Marine Exchange of Southernwould ease.
That has not happened. Execu-
tives at Ta rget had expected some
of the froth in consumer demand
to taper off this year with the
waning of stimulus dollars. But
the speed and extent of the shift
caught them flat-footed.
The retailer ended up with too
much of some goods, especially
bulky items like televisions and
appliances, and not enough of
others. Suddenly hot were items
like trendy fashions for people
resuming their social lives, a s well
as sunscreen and cosmetics for
travelers, executives told analysts
this month.
The company opted to cut pric-
es on surplus goods, which eased
its inventory backlog at the ex-
pense of quarterly profits. “While
we anticipated a post-stimulus
slowdown” and “we expect the
consumer to continue refocusing
their spending away from goods
and into services,” said chief exec-
utive Brian Cornell, “we didn’t
anticipate the magnitude of that
shift.”
The new consumer mood mayat home.
This goods boom and services
bust reversed the usual pattern of
consumer behavior during a re-
cession. Tough times typically
prompt people to postpone pur-
chases of big-ticket items. But in-
stead, with millions of Americans
working from home, dry cleaners
and hotels suffered while online
orders soared.
Multiple rounds of federal
stimulus, combined with the easy
money policies of the central
bank, helped support consump-
tion while the economy healed.
Over the past year, as the unem-
ployment rate steadily dropped,
ample job opportunities fueled
continued spending on goods.
Much of what Americans
bought came from overseas facto-
ries, particularly in China, and
clogged global supply chains. By
last spring, the collision between
surging demand and constricted
supply was pushing prices up. At
the Federal Reserve, Chair Jerome
H. Powell said for most of 2021
that the supply snarls would
prove temporary and pricesdata adjusted for inflation from
Flexport, a freight forwarder. A
separate metric cited by Goldman
Sachs shows goods consumption
about 5 percent higher from be-
fore the pandemic, down from a
peak gap of 15 percent.
“We are just in the early stages
of seeing t he rotation of consumer
spending from goods to services.
As time goes on, you are going to
see more of that. Food services are
quite strong. Travel is picking up,
airfares and hotel occupancy,”
said Kathy Bostjancic, chief U.S.
economist at Oxford Economics.
“The consumer is looking more to
services spending, especially with
spring and summer upon us.”
The shift toward services, re-
flecting consumers thirsty to re-
sume their previous lifestyles, is
good news and not just for busi-
ness owners like Parikh. It also
could ease pressure on stressed
supply chains and help the Feder-
al Reserve in its campaign to cool
inflation.
The change is evident through-
out the economy. Retail sales in
April were up 8 percent from a
year earlier, according to the ad-
vance estimate from the Com-
merce Department, which does
not take inflation into account.
But spending at restaurants and
bars jumped nearly 20 percent. In
March, spending on services ad-
justed for inflation hit a record
$8.6 trillion, topping the previous
mark set in February 2020.
Hotelier Marriott said global
room demand from leisure travel-
ers in the first quarter was 10 per-
cent above 2019 bookings. And
Southwest Airlines said its quar-
terly o perating revenue by the end
of June will top levels before the
pandemic.
But Ta rget, one of the largest
retailers in the country, was
caught off guard in recent weeks
as consumer preferences abruptly
shifted, leaving it with a mountain
of products like appliances and
televisions that it was forced to
discount.
“A re we back to normal? No.
Are we headed back to normal?
Yes,” said Chris Rogers, principal
supply chain economist for Flex-
port in London.
From the outset of the pandem-
ic, Americans trapped at home
took solace in buying things.
Things to use at home. Things to
improve the home. Things to wear
CONSUMERS FROM A1
Consumer spending shift to services may help ease supply chain, inflation woes
JOHN LOCHER/ASSOCIATED PRESS
Visitors pass outside the Venetian hotel in Las Vegas. Consumers are now traveling and dining out like they did before the pandemic.You can take our word for it:“Never Clean Your Gutters Again!”®*Offer expires 6/30/22. Valid on initial visit only. Min. purchase required. Cannot be combined with other offers. †Subject to credit approval. Interest is billed during the promotional period but all interest is waived if the purchase amount is paid in full within 12 months. There are no required minimum
monthly payments during the promotional period. Financing for GreenSky consumer loan programs is provided by federally insured, equal opportunity lender banks. From Forbes.com/home-improvement, 3/2/2022 © Forbes Marketplace Operations, Inc. 2022. NMLS #1416362. See website for state
licenses and more details. Licensed, Bonded, Insured. © 2022 Lednor Corporation(877) 397-9 442 | HarryHelmet.comAnd you can take theirs, too:OUR WOW PROCESS
®
A Company Built on Family Values & Trust Since 1981.
From initial contact with our companyall the way to product installation, you willdeal with REAL LOCAL PEOPLE with theexpertise to answer all your questions andget the job done.You’ll enjoy:- Triple Lifetime Warranty
- Best gutter protection
- Family owned & operated
- Military & senior discounts available
Call for a FREE Estimate
“Excellent rain
resistance...
100% gutter
compatibility...
Best-in-class
warranty”
Forbes.com/home-improvement, 3/2/2022
© Forbes Marketplace Operations, Inc. 20220%
F inancing Available†
Or Payments from $40/mo†SALESummer Countdown
50
% OFFInstallation
*+10% OFF Entire Job
*