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The hopes of a soft landing and more: interview with Jason Schenker

Supply chain leaders are banking on a better 2024 than they experienced in 2023. But is their optimism justified? We asked acclaimed economist Jason Schenker that question and more.

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By most accounts, 2023 was not a stellar year for companies in the supply chain sector. Rising inflation, high fuel costs, and a glut of inventory left over from the pandemic years combined to create a market that was sluggish at best.

Some sectors, like the trucking industry, experienced what amounted to a recession in everything but name. At the same time, warehouse projects were slow to get off the ground. And businesses of all stripes struggled to find the labor they needed.


But with the turn of a new year, there is always hope for better times ahead—and, in the case of the supply chain sector, that hope is justified, according to economist Jason Schenker.

Schenker, who serves as president of Prestige Economics and chairman of The Futurist Institute, is considered one of the best economic minds in the business. Bloomberg News has ranked him the #1 forecaster in the world in 26 categories since 2011. LinkedIn named him “Top Economics Voice,” and more than 1.1 million students have taken his LinkedIn Learning courses on economics, finance, risk management, and leadership.

Schenker is also the author of more than 30 books, including 15 bestsellers on supply chain, finance, energy, and the economy. He has provided economic and material handling forecasts for the industry association MHI since 2014. He spoke about supply chain economics with Group Editorial Director David Maloney on a recent episode of DC Velocity’s award-winning podcast, “Logistics Matters.”

Q: Jason, we just wrapped up 2023, which was a difficult year for companies that provide logistics and supply chain products and services. What were some of the factors that made things so tough?

A: I think there were a few things going on here. First and foremost, you had a rise in CapEx [capital expenditure] and OpEx [operating expense] costs. You had high interest rates, which eroded margins. You also had a tight labor market driving up labor costs. There were material costs and inflation that are still elevated. All of those factors were nipping away at the profit margins for businesses in the sector.

And, of course, we’ve also seen in some of the proprietary data that we produce for MHI—the MHI Business Activity Index—that new orders weren’t as strong as in the past, including several months where they were pretty weak.

However, shipments remain positive, as we saw the backlog burning off, with unfilled orders and inventories finally getting shipped out the door. But that reduction in new orders is something we’ll have to keep an eye on, especially in a relatively high-interest-rate environment.

Q: As you mentioned, interest rates remain high. How much does that affect investments in new technologies, which drives a lot of supply chain-related spending?

A: I think there are big investments still being made on the technology side. Anything that can boost productivity has still drawn tremendous investments. And, of course, if you are a business in the logistics, supply chain, or material handling space and you need equipment, some of the order times are still quite long because of the backlog that had built up so significantly in 2020 and 2021, and even parts of 2022. They’ve only really started easing in the past year. So, those things still represent challenges for many companies in the space.

Q: We’ve seen very low unemployment in the last couple of years, which has made it tough for companies looking to hire warehouse workers or truck drivers. Do you see the labor crunch easing anytime soon?

A: Oh, that’s been the real bugaboo for the industry, and that’s why there’s still so much interest in automated solutions and technologies that can boost productivity in logistics and supply chain.

If you look at some of the most recent data, we see that even for the month of October 2023, there were about 1.2 million open jobs in trade, transportation, and utilities. And if we dig a little bit deeper, there were 207,000 open jobs in wholesale trade in the U.S. In transportation, warehousing, and utilities, there were 488,000 open jobs. That’s a lot, right?

And even though the labor market slowed from 2022 to 2023, open jobs in transportation, warehousing, and utilities didn’t decline much in that period. There were 491,000 open jobs in October 2022 compared to 488,000 in October 2023—a drop of only 3,000 jobs. The reason I’m bringing this up is to show that the competition for labor is really, really tough. You have fewer than 2 million people collecting unemployment, and as of October, you had over 8.7 million open jobs. So, you have a lot more open jobs than people seeking work, and that’s been true throughout all of 2023. And it’s likely to remain a challenge throughout the year ahead.

Q: Will that put pressure on employers to raise salaries?

A: Well, it’s definitely a seller’s market if you are labor right now. That definitely drove up salaries in 2023, and it gave a lot of unions and other organized labor [groups] opportunities to push for wage increases. We saw it with the auto manufacturers and in health care, and we’ve seen it across industries.

And we could continue to see that, if the unemployment rate remains low, the number of people collecting unemployment remains low, and the number of open jobs remains high. You don’t need to run an economic research firm to know that if demand exceeds supply, then price goes up. And that means we could continue to see some labor price pressures, and further increases in wages, in the year ahead.

Q: Let’s look ahead to the remainder of this year. Do you think we’ll be able to achieve that soft economic landing that many are hoping for?

A: Well, that’s the hope, right? At the end of the day, the good news is that about 70% of GDP is driven by people buying stuff. It’s driven by consumption, and people with jobs who are making more money than they’ve ever made are out there spending. So, that’s the good news.

But it’s a double-edged sword with this labor force, because while we have a really tight labor market that’s really competitive for employers, it erodes profit margins, and that’s an issue. On the upside, by driving up wages and having full employment in the economy, you’ve got people out there making money, spending money, and that drives consumption, and it drives GDP. So, it’s really a mixed bag.

But trust me, we would rather have an economy with a tight labor market that’s growing than an economy where hiring is easy but there’s no business because we’re in a recession and so many people are out of work. So, this is the much preferred scenario at a macro level.

If I were to take a poll of companies working in supply chain and logistics and asked them, “Hey, would you rather struggle to maintain your profit margin, but still have lots and lots of business? Or would you rather be in a situation where business is slow, but labor is cheap and plentiful?”—trust me, the vote wouldn’t even be close. Most businesses would much rather be in a situation where we have a solid economy, solid growth, and strong consumption—and, yeah, labor has become pricier and it’s challenging to get high-quality people, but at least there is business to be done and a reason to hire.

Q: Let’s get a bit more specific. What do you feel are the prospects for supply chains in 2024?

A: I think we’re going to see more geopolitical risk. We’ve seen this for a number of years, as we see Cold War Two continuing to devolve, and we see trade tensions between the United States and China and their allies—tensions that have spilled over into regional proxy wars and will interfere with trade. We began to see that happen in the Red Sea, where hostilities are currently disrupting transit through the Suez Canal.

We have other supply chain issues and challenges in the Panama Canal as well that cropped up in the latter part of 2023. As we’re looking ahead, I think there’s still reason to keep our eye on these supply chain bottleneck risks.

And, of course, the war in Ukraine isn’t over, and that presents all kinds of commodity risks. And that, by the way, is what has engendered much of the inflation we’ve been seeing. So, that risk hasn’t gone away.

In addition to that, the geopolitical tensions in the Middle East present real risks to oil prices. We could see more conflicts proliferate globally that present risks of various stripes to supply chain industries, not just from a sourcing standpoint but even from a transit standpoint. So, I think geopolitics is going to be front and center as both an inflation risk and a cost risk, as well as a security-of-supply risk.

Q: It does sound like there are a lot of risks, but I also think supply chains have become more resilient over the last couple years. Will all the work they’ve done to boost resiliency bear fruit in 2024?

A: I think we’ve seen some improvements in resiliency, but the level of risk that we’re facing on a global basis is truly significant. I’d say here in North America, we’re in a blissful situation economically compared to the situation in China, where the economy has been weak and there are some major systemic problems, or in Europe, where the Russian war in Ukraine has had significant impacts and there have been some significant weaknesses.

So, the U.S. is in a charmed position economically, as we project out how the rest of the year is going to be, even if our growth slows or if job gains slow, because if inflation falls, the potential for lower interest rates increases, right? Those things all look increasingly likely, but even though we see some slower growth or some slower job gains, we don’t see a collapse. Part of the reason is that massive backlog of open jobs we’ve got across sectors, where [rising] wages are fueling economic growth.

We’re in a better spot than most economies. Securing your supply chain and being aware of geopolitical risks, both from a material-cost and from a security-of-supply standpoint, that could reverberate across your cost structure is going to be absolutely critical. 

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