US economy faces bottlenecks as it begins road to recovery

A few blocks from the White House, the lunchtime rush is beginning at the Hamilton.

The stylish restaurant and brasserie is brimming with atmosphere – polished wood panels, high ceilings and private booths make this a popular destination for DC residents and power brokers.

In one corner, a cabinet member of the Biden administration is having lunch, a burly group of secret service agents keeping a watchful eye from a nearby table.

At the front entrance, tourists are lining up to escape the relentless Washington heat.

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But while the Hamilton is back in business after a tough year due to the Covid-19 pandemic, management is facing a new challenge – finding staff.

"This has been one of the most challenging times for our industry," says Kilkenny native and general manager John Grace. "Hiring staff is a much slower process than before. We have had to get creative in how we attract employees, and how we manage the restaurant in terms of staffing certain sections. Most customers are very understanding that we're in a period of adjustment right now."

Labour shortage is a challenge facing businesses across America as the US economy rebounds from the pandemic.

Travel ban

In holiday towns along the east coast, notices abound looking for workers. The lack of J1 students this year – most Europeans are still prohibited from visiting the United States due to its travel ban – is having an impact, particularly on seasonal businesses that depend on temporary workers.

Children’s summer camps – a mainstay of American childhoods – are facing staff and even food shortages in some cases due to supply chain issues.

The economic data bears out this reality.

GDP figures this week showed that the US economy had officially returned to pre-pandemic levels, growing by 6.5 per cent on a year-on-year basis in the second quarter. But the growth of 1.6 per cent compared with 1.5 per cent in the first quarter was well below most forecasts. The disappointing number reflected some bottlenecks in the economic recovery– supply chain and labour market shortages.

Despite pent-up consumer demand, many businesses cannot keep pace. Customers are waiting months to receive furniture and other goods, or finding that many items are out of stock when they try to order. Even housing activity slowed in the second quarter. Despite a huge demand for houses, residential construction fell by 2.5 per cent as builders struggled to get materials and, in some cases, workers.

The labour shortages in particular have turned the focus on to Biden’s expansionist economic policy, and his decision to extend Trump-era pandemic payments until September. Many Republican-controlled states have already stopped the top-up payments, believing that it was disincentivising people to work.

The Biden administration rejects this, noting that most employees are not returning to the workplace because of other reasons, for example, lack of childcare and continuing health concerns about the pandemic.

Biden has also welcomed the fact that corporations, from airlines to fast-food outlets, are offering workers better pay and terms and conditions in a bid to attract staff – a positive development in a country where the minimum wage can be shockingly low in some states.

Inflation

Inflation is the other looming concern. Republicans consistently highlight the fact that Americans are facing higher prices on everything from fuel to groceries. The Biden administration argues that it is a temporary fallout from the pandemic, but politically it could start to feel the heat from voters as next year’s midterm election season approaches.

The rise of the Delta variant has added new uncertainty to the economic picture. A month ago cities, from New York to Los Angeles, were very much open for business. Now, business owners worry that a new requirement to wear masks indoors and concerns about the variant could fuel consumer caution. Others point out that America’s poorest have been hit hardest by the pandemic. As with other developed nations, the pandemic has served to exacerbate wealth divisions. While the better-off have accumulated savings, many of those with less secure jobs have needed government support to make ends meet.

In September, the federal unemployment benefits are set to end. An eviction moratorium is due to expire this weekend, raising concerns among renters, though Biden has requested Congress to extend it.

As the full economic fallout of the once-in-a-generation pandemic emerges and the US rebounds, it seems unlikely that the deep wealth disparity that characterises one of the most unequal societies on earth will be corrected.