The number of headlines in today's daily report talking about labor shortages is increasing rapidly and the constraints that it is placing on the economy are moving well beyond the airline and restaurant industries. In our Sunday Thematic (to be found here), we will look a little deeper at what effect this could have on the chemical industry beyond what Sherwin Williams noted for 1Q 2022. At a 30,000 foot level, the more people that are contagious and isolating, the less overall economic activity there is, which at the margin would negatively impact transport fuel demand beyond the more quantifiable jet fuel drop associated with flight cancellations. The more significant issues will be with businesses that cannot operate without a minimum number of trained staff and we note the following pharmacy headline Walgreens, CVS Shut Some Pharmacies on Weekends as Omicron Strains Staffing as a good example. Trucking and other delivery services could face constraints because of driver availability but this will just create backlog rather than broader economic harm. Failure to get critical raw materials may impact the ability to operate for select manufacturers, but we saw some chain inventory build in the 4th quarter of 2021 and this should limit this risk.
Source: The Conference Board, YankeeInstitute, January 2022
These labor shortages are a risk to some of our bullishness around building product demand as lack of labor could leave construction expectations coming up short in 2022. Much will depend on how we emerge from this COVID wave and whether the labor shortages extend into the warmer weather and what is traditionally a seasonal uptick in construction activity.
