A Blog by Jonathan Low


Nov 17, 2021

As LA Port Backlog Drops 29 Percent, Consumer Spending Is Rising Despite Inflation

The agreement brokered by the Biden Administration to have the Ports of LA and Long Beach work 24-7 appears to be having the desired affect. The backlog of containers waiting to be unloaded is down 29%. 

At the same time, consumer spending continues to rise despite inflation and by next month unemployment will be at its lowest in 50 years. JL 

Chris Greenspon and Lita Martinez report in LAist and Heather Cox Richardson reports in her blog:

In late October, there were 95,000 import containers on the docks. “After three weeks while working a record number of ships, we've reduced that 29%."  There are 65,000 empties to get rid of in the Port of L.A., though sweeper ships have been coming through. Retail sales are higher than expected, 16% higher now than they were a year ago. They jumped 1.7% in October, with Americans spending $638.2 billion that month. Unemployment is currently at 4.6% and is expected to be at 3.5% by the end of the year, a rate that will match that of 2019, which was the lowest in 50 years.

Progress has been made in reducing the glut of shipping containers sitting at The Port of Los Angeles, so officials are holding off on charging dwell fees on important containers that are parked too long.

In late October, there were 95,000 import containers on the docks in San Pedro.

“After three weeks while working a record number of ships by our great ILWU men and women, we've reduced that 29% on the aging cargo side, and all imports are down about 25%,” said Port of L.A. Executive Director Gene Seroka.

But that's just the loaded containers. There are currently 65,000 empties to get rid of in the Port of L.A., though Seroka says sweeper ships have been coming through and more are on the way.

President Biden declared last month that L.A. County's ports would operate 24/7, but that hasn't happened yet. U.S. Transportation Secretary Pete Buttigieg met with Seroka to discuss the backlog, saying the change isn't like "flipping a switch." He said the administration will announce a $230 million investment in U.S. ports through the Port Infrastructure Development Grant Program.

“As so many of us know, decades of under-investment in our supply chain infrastructure, combined with unprecedented consumer demand ... and of course, a global pandemic, [are] all combining to put our supply chains to the test,” Buttigieg said.

Seroka says the ports have been open 19 hours a day, offering flex hours for others in the supply chain to link up. That also has yet to happen.

“The warehousing complex traditionally work during the day and they found it difficult to bring in workers during this time,” he said. “On the trucking side, as we've explained before, drivers have a limit, federally-mandated, of 11 hours behind the wheel every day, and if they work consecutively, they must take a rest. We need to add more drivers.”

President Biden signed a massive trillion-dollar infrastructure spending bill into law Monday, and California is set to receive more than $45 billion (assuming the state can solve a labor dispute). White House officials say the bill will help get more truck drivers into the field, with an apprenticeship program to encourage more 18-to-21-year-olds to sign on.

The bill also contains $17 billion for America's ports, including the ports of L.A. and Long Beach. California Senator Alex Padilla says the package will help alleviate the cargo backlog.

“Whether it's something as simple as more land for storage of containers is part of it, but modernization of the ports, to make it more efficient,” he said. “Whether it's electrification of the ports, to bringing rail more directly into the ports to get cargo in and out that much more quickly.”

About 40% of all imported goods that enter the United States must first go through the twin ports of L.A. and Long Beach, which has seen heavy congestion this year due to supply chain issues triggered by COVID-19.



In spring 2020, Congress passed the $2.2 trillion bipartisan CARES Act, then in December 2020, the $900 billion bipartisan aid package. Then, in March 2021, the Democrats passed the $1.9 trillion American Rescue Plan.

These put more than $3 trillion into the economy, raising incomes and enabling individuals to put money into savings. Yesterday, the government sent out its fifth monthly payment to the families of around 61 million eligible children under the child tax credit that Democrats expanded under the American Rescue Plan. Yesterday’s payments were around $15 billion. So far, the program has delivered about $77 billion to families across the country which, in turn, enables them to buy household goods that pump money into the economy.

By protecting individuals’ incomes, the government also protected income tax revenues, enabling state and local governments to continue to function, while the money in people’s pockets has also meant they continued to buy goods, keeping sales taxes producing money. Far from collapsing, as it looked like they might in the early days of the pandemic, state and local governments are currently strong financially.

Other economic news is also good. Today, news broke that the government has badly underestimated job growth. Between June and September, the Bureau of Labor Statistics underestimated job growth by 626,000 jobs. The pandemic meant that businesses were slow to fill out paperwork, and this, in turn, meant numbers were underreported.

Goldman Sachs says that by the end of 2022, the nation’s unemployment rate will be at a 50-year low. Unemployment is currently at 4.6% and is expected to be at 3.5% by the end of the year, a rate that will match that of 2019, which was the lowest in 50 years.

Retail sales are also higher than expected. They are 16% higher now than they were a year ago, during the height of the pandemic. They jumped 1.7% in October, with Americans spending about $638.2 billion in that month. The National Retail Federation expects strong holiday retail sales. J.P. Morgan has upgraded its growth expectations for gross domestic product in the fourth quarter from 4% to 5%.

Products are also refilling shelves. Walmart today reported that it will have full shelves for the holiday season.

On all of this news, the stock market rose again.

All of these indicators are excellent, and they reflect the government’s protection of the demand side of the economy to prevent a situation in which the economy can’t recover from a recession because not enough people have enough money to get things moving again.

But now we are looking at a very different problem. The pandemic crashed supply chains across the world, creating a supply shortage (someone described this as the parking lot after a concert, when everyone is trying to leave at once, and as someone who once spent 4.5 hours trying to get out of a parking lot after a U2 concert, I love this comparison). Prices are rising as people who have money, thanks to lawmakers’ efforts to guarantee that we didn’t prolong a recession because of a demand problem, are trying to get scarce goods.

This has created 6.2% inflation in consumer prices, 4 points above the 2% inflation for which government officials aim, and a 30-year high. (Interestingly, gasoline prices, to which people look as a sign of inflation and which have risen about $1.50 a gallon from their low during the pandemic when no one was buying gas, are a reflection of global oil prices and have little to do with U.S. policies.)

Treasury Secretary Janet Yellen says that the smoothing out of supply chains and the end of the pandemic—if we can finally manage the pandemic—will bring prices back to expected levels, and Biden’s work with ports and shippers to expand their operations in order to clear bottlenecks appears to be having an effect. Bloomberg reports that the number of containers sitting on docks at the port of Los Angeles had declined 29% from its high. Still, the Federal Reserve has begun to scale back its support for the economy to try to cool the market.


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