Hacker News Reader

Comment by testcase_delta | Hacker News Reader

I own a wholesale toy business and the entire cost increase for us is ocean freight. A 40’ container from Asia used to cost 3k, now it’s 12k to 15k (and takes months longer). If a 40’ container can carry 10k units, that’s a unit cost increase of over a dollar just for freight.

View on HN

Central banks try to keep inflation at 2% by controlling local wage inflation. However markets are globalized so price of imported goods are energy price shipping plus foreign wage inflation. Thus local central banks cannot control foreign wage inflation and thus inflation.

Local inflation is also exported through export prices but that currency exchange rate can control to some extent.

If only a nation could manufacture things locally and not be required to get them from Asia...

They could, but the government has made it too costly to manufacture locally.

The government made the companies start accounting for externalities like not poisoning the rivers and not having the workers fall entirely on the government dole the instant they retire. So companies did what they do and went to countries that didn't care about protecting the environment or populace. Blaming the government for this state of affairs is misguided.

The government could stop signing free trade agreements with other countries that don't similarly protect the environment or populace.

Sadly the TPP was abandoned along with the significant environmental and worker protections it would have imposed, neither of which I can see being a feature of China's replacement for it.

The regulations go far, far beyond environmental issues. For example,

https://www.whitehouse.gov/briefing-room/presidential-action...

That's about improving the regulatory process, not sure what's your point?

Labor costs would devour shipping costs instantly. The US is approaching full employment again. Even if we had factory capacity, there aren't 10M spare workers to do the jobs. Not without wage inflation.

I don't understand why the US doesn't try to make Central America at least moderately well-off instead of building a wall.

Here is another chance: put some of the manufacturing in Central America where costs are much lower and there's not much of a distance to market.

Because the materials that go into production are located in Asia. It's the second, third, fourth order dependencies that are challenging.

Relocating would mean both building up entire verticals from raw material and all stages of processing, but also everything adjacent - labor force with expertise, transportation and distribution, etc. This is happening in various parts of the world for various industries, but it's slow and capital intensive.

This is the strategy of current administration, see this from yesterday: https://www.whitehouse.gov/briefing-room/statements-releases...

>I don't understand why the US doesn't try to make Central America at least moderately well-off instead of building a wall.

Boy wait till you hear about this new thing called 'NAFTA'. Hey, we gutted our manufacturing sector but those folks in northern mexico sure are happy.

I'm not anti freetrade, but we absolutely destroyed good jobs open to people without a degree, and then had ivory tower economists tell us it was for our own good. It's not hard to understand why such areas would support a horrible person for president if he acted like he was on their side.

Because it's cheaper and easier to build a wall. We can not continue to take in the rest of the world virtually unvetted. Does anyone remember there is a pandemic, housing crunch, and rampant inflation occurring in the US. We should focus on our country at the moment.

Approaching full employment? Again? Take a quick gander at labor participation rates and rethink this prediction.

It is approaching full employment, yes. You can see this by looking at U6[1] which includes anyone who has been seeking employment within the previous 12 months but have been unable to secure a job and has not searched for work in the past four weeks. It also includes anyone who has gone back to school, become disabled, and people who are underemployed or working part-time hours. It's down to where it was in early 2019. The Labor Force Participation Rate is not a measure of employment unless you think the employment rate was lower in 2019 than it was in 2008[2]. The pandemic prompted more older workers to retire but it's just continuing an existing trend in an aging country.

[1]https://fred.stlouisfed.org/series/U6RATE

[2]https://www.bls.gov/charts/employment-situation/civilian-lab...

Everyone that's looking for a job can find a job (good job market / lots of openings)

..is VERY different than...

Everyone capable of working is actually working (full employment)

By your definition of full employment, the US has never had "full" employment.

There is a canonical definition and that's just that there is no more demand-deficient unemployment. Meaning it doesn't even require U3 to hit 0 let alone LFPR to hit 100%. It allows for churn, underemployment as well as unemployables. It's not a metric of achieving utopia, just a situation with almost no slack in the labor market for employers.

https://en.m.wikipedia.org/wiki/Full_employment

On the contrary, while the market has improved labor participation is way way way below where it was before COVID hit. There is plenty of slack.

Plenty of slack, but those out of the work force need much more incentives to get back in now, which would translate into higher costs as well. Kind of a lose/lose.

Anyone not participating isn't slack. Not unless they come back in and it doesn't seem to be happening. I think a lot of people who were close to retirement were pushed over by both fear of death and a crazy bull market fluffing up their 401Ks

Even with wage inflation, you're just poaching from other companies creating new vacancies, you aren't creating new humans

I'm actually making a new toy in the US partially in response to the shipping backlog. The US is the second largest manufacturer in the world behind China (I find lots of people don't know that). As long as you design things that don't require much hand labor prices can be competitive while being made in the US.

China is no longer the cheap place to manufacturer hand labor intensive items. Vietnam is where that happens. If you ever want to know where it's cheapest to have things made by hand look at where clothing is made.

Is that due to capacity at ports being restricted by lack of downstream capacity (ie trailer availability)?

I have read, without a lot of evidence to be fair, that port capacity is a small part of it. Overseas container shipping companies had, pre-pandemic, been competing so heavily that they were often running a loss and hoping to make it up on volume. They used the pandemic to sort of consolidate and lower capacity by decommissioning ships and so dramatically increase per-container price. Not sure if there's a lot of clear evidence for it, but it's one explanation I read.

I feel like it'll only get worse as we move past covid and everything is open at 100% like it was pre-covid.

Ocean shipping has been a boom/bust business since forever. It is possible "this time is different," and there are articles with exactly that headline, citing moderation in ordering new ships, but I don't see why such restraint will last.

Reply on news.ycombinator.com