By Jared Bernstein
This is the first installment of “Bernstein’s Beat,” a new, regular feature on the CEA blog where we will briefly investigate something interesting (i.e., interesting to me!) from the recent data flow. In this maiden voyage, we look at an important shift in the structure of demand that began when the pandemic hit and persists today: the increase in the demand for goods over services.
Figure 1 shows inflation-adjusted goods and services purchases, pre- and post-pandemic, with both series indexed to 100 in February 2020. Though we expect the gap between these two series to diminish as COVID fades and as people rebalance their spending more evenly between goods and services, it remains wide.
One implication of this shift in demand is an increase in the pressure on the supply chains that move these goods, both globally and domestically. This has, of course, been well-documented, with one prominent example being the congestion at the ports. However, one factor that has not been adequately understood is that, while the ports are clearly constrained, they are actually moving more containers in and out than in any year since 2000. As shown in Figure 2, they are moving about 19 percent more containers than in either of the previous two pre-pandemic years of 2018 and 2019.
In other words, while supply constraints clearly persist, they are not due to less “throughput” at the ports. To the contrary, hard-working port employees have increased the rate at which they are moving containers. The rest of the supply chain—warehousing, trucking, and rail—simply has not been able to fully adjust thus far to the rapid and persistent uptick in demand for goods. CEA will continue to track this gap in demand between goods and services, one which we expect to close as COVID fades and more people re-engage with in-person services. It is also possible, though unknowable at this early juncture, that there has been a structural, more long-lasting shift in consumer demands. If so, such a shift would have broader implications for the future industrial and occupational structure of work.