Inflation in Time & Inconvenience

The standard playbook for businesses during a recession is to slow investment, lay off part of their workforce and decrease the supply of whatever it is they produce. This makes sense when you consider people tend to rein in their spending when the economy slows.

This decrease in spending is also what can prolong an economic contraction. It becomes a self-fulfilling prophecy.

When you combine this idea with the fact that we essentially shut down large swaths of the economy in March and April of 2020, it makes sense that businesses would drastically cut production at the onset of the pandemic.

This is how we got the largest quarterly drop in GDP ever.

But once the government started sending out money and increasing unemployment benefits and the Fed stepped in to save the markets, this quickly turned into the shortest recession ever.

And demand surged in a way that we have never seen before coming out of a recession.

This has led to all sorts of unintended consequences. We have a labor shortage. There are supply chain issues. And it’s become difficult to buy certain items that would have been readily available in the past.

Many investors have been concerned about the possibility of a sustained above-average inflation rate. It remains to be seen if the current uptick in prices is here to stay or transitory in nature but this unique recession and recovery has created a situation in which many people are experiencing inflation in time and inconvenience.

There are a number of instances in my own life where this has been the case.

My SUV was in a minor fender bender earlier this summer. I brought it to the body shop to have them fix the bumper the first week of August. It’s still there. They can’t get a rear-sensor from Ford because they’re short on parts. They’re hopeful it will be ready in October.

I’m now going on two months of driving a rental.

The rental car situation has also been an experience. When the pandemic hit and travel plunged, rental car agencies sold down some of their fleets of used cars. What was the point of having full lots of cars when no one was traveling?

Then came a mass exodus from big cities to the burbs so demand for cars skyrocketed. The only problem was there weren’t enough semiconductors to build more new cars because all of the automakers shut down production.

So used cars were in high demand and those prices shot up. Therefore, the car rental agencies were stuck with not nearly enough vehicles on their lots. This means car rental prices have also boomed.

This is why I was forced to drive a Chevy Silverado the size of an ocean liner for 6 weeks. It was the only rental they had on the lot.

Appliances are also in high demand since so many people decided all at once they wanted to buy a new home or renovate their current residence.1

Our dryer was having issues last month so I checked with the store we purchases it from. They said we could have a technician come out to look at it but it would be weeks before anyone could make it. Two of their service employees had just quit for higher-paying jobs. And even when someone could come out to look at it, the parts would likely take months to come in.

I have three kids which means we do at least one load of laundry a day. Our only choice was to buy a new one. Unfortunately, they didn’t have one available in white. It would take 3 months for another one to become available.

A new model in a different color was our only option. Our only choices were to buy something in their inventory or wait a very long time. This is how we now have a washing machine that’s white and a dryer that’s grey.

At least we have dry clothes now.

A similar dynamic was at play when looking for a new SUV for my wife. Her current lease runs up in December but knowing about the shortage of new cars we decided to start looking early.

The dealership was a barren wasteland. No new cars inside the dealership at all. Just a wide open space. And the lot was maybe 20% full.

We asked to see the model we were interested in. There were only two available. They told us it was basically what you see is what you get. Anything different would take months.

Luckily we like one of the two options but didn’t have a lot of choice in the matter. It was also nearly impossible to negotiate a lower price because inventory is so low. The offset to this was getting a much higher price for our trade-in than we would have otherwise because used car demand is so high.

The labor shortage is hitting our children’s lives as well.

There are sporadic bus route cancellations because our school system can’t find enough bus drivers. They’ve recently upped the pay but it’s still an issue.

The daycare where my twins go to preschool has been having trouble finding enough teachers for months. They’ve recently had to shorten their hours and haven’t ruled out closing some of the classrooms if they don’t find more workers soon.

Even our dog groomer had to cut back on the number of days they’re open and the services they provide because they can’t find enough help. We had to find a new one.

Some of this stuff will prove to be temporary. Used car prices can’t keep rising forever. It might take a while but eventually the chip shortage will work itself out.

But it’s possible the pandemic has change parts of the labor market forever. People realized there were jobs they simply didn’t want to perform anymore, especially for the pay they were receiving. Higher pay will help but it’s possible some of these jobs never get filled as they were in the past.

So while prices in most areas of my life aren’t necessarily going crazy, there has been inflation in time. Certain activities have become more inconvenient.

This is no fun but I would gladly take this inconvenience over the alternative — a depression that completely wrecked the economy.

Michael and I talked about America’s daycare crisis, the experience of buying a new car right now and more on this week’s Animal Spirits video:

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Further Reading:
Shortages Everywhere You Look

Now here’s what I’ve been reading lately:

1It sounds like the chip shortage is causing problems here too.

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