The U.S. economy is "fragile" and "teetering," with supply chain disruptions holding the potential to deal the blow that pushes us into a recession, an expert says.
Stephan Weiler, an economist at Colorado State University, was speaking of the lockdowns and protests in China, the potential of a railroad strike, and the shortage of truck drivers.
“That combination, if everything played out sort of in the worst scenarios, is exactly the kind of tip that could push us into a recession,” he said.
Bradley Martin, the director of the RAND National Security Supply Chain Institute, said he expects Congress to intervene to prevent a rail strike next week.
President Joe Biden has called on lawmakers to act, saying “a rail shutdown would devastate our economy.”
Martin said the U.S. supply chain has been slowly improving since its worst days during the first year of the pandemic.
“The supply chain issues have been working themselves out,” Martin said. “It has gotten better.”
But he said the nation’s supply chain is “still somewhat fragile,” and a rail strike would deal serious damage.
Meanwhile, the long-haul trucking industry is dealing with a shortage of drivers.
“We peg the driver shortage, this year, at roughly 80,000,” American Trucking Associations Chief Economist Bob Costello told Sinclair Broadcast Group’s Mark Hyman.
And Costello said the shortage of truck drivers could reach 160,000 in the coming decade.
“Trucking is an industry where a predominant amount of the drivers particularly are, they’re Baby Boomers. These are folks that are pretty close to retirement in some cases," Darrel Harris, president of Yellow Trucking, told Hyman.
Martin said the labor shortages in the supply chain aren’t just with trucking. He said there’s also an aging workforce at shipyards.
“It’s not just with trucking, it’s with a lot of different skilled labor types of things,” he said. “All of those things are going to be an issue that over time the nation has to address.”
Martin said the biggest known threats to the U.S. supply chain are labor disruptions, geopolitical dangers, and natural disasters.
When asked if China or Russia posed the biggest threat, Martin said, “It could be either or both, or something else.”
Weiler said all of these are “wildcards” that could affect the U.S. economy. And he said, “China’s getting more complicated.”
The “zero-COVID” measures that are behind the lockdowns in China aren’t new. What’s new is the protests.
Weiler said the “trillion-dollar question” is how the Chinese government will react to the protests.
The best case for the U.S. and world economies would be an easing of the lockdowns, he said.
But for a government that hasn’t tolerated dissent, Weiler said there are worries a crackdown could have a “gruesome effect” with further disruptions to the supply chain and world economy.
“I think the protests are brave and legitimate given the circumstances that that country has been under since the pandemic began, but I’m just afraid of what the government response might be,” Weiler said. “I think there’s greater fear than necessarily optimism regarding the protests.”
He noted China doesn’t care about the U.S. or how its actions hurt us economically.
Weiler said the lockdowns in China can have a greater impact if they happen in regions more vital to exporting.
“It’s kind of a game of roulette,” he said. “Some provinces aren’t as important economically, but the ones that are really, the big exporters, like along the coast and the special economic zones, if one of those goes, then you immediately run into trouble.”