Supply Disruptions and the U.S. Economy

"The COVID-19 pandemic has disrupted the production of many goods and services. Although those disruptions have waned since spring 2020, some continue to constrain production, exacerbating inflationary pressures. The Biden Administration has announced a series of initiatives to address supply chain disruptions, which are detailed in CRS Insight IN11927. This Insight discusses some of the factors contributing to supply disruptions and policy considerations surrounding this issue

Supply Disruptions

Recently, supply has been constrained by disruptions to global supply chains, labor shortages, temporary business disruptions linked to COVID-19 outbreaks, and commodity shortages linked to the 2022 Russian invasion of Ukraine. Pandemic-related shutdowns and production delays worldwide have caused a chain reaction of delays in the availability of products across a wide range of industries. Product availability has been disrupted for both final products sought by consumers and inputs used by American producers. Earlier shutdowns created backlogs that have taken months to unwind.

The labor force participation rate has been unusually low throughout the pandemic, which has resulted in companies being unable to fill job openings. Periodic surges in COVID-19 cases have also caused labor shortages at times that have hobbled production. For example, the Omicron surge led to employee absences that caused new supply disruptions in the winter of 2021-2022, including to flights and passenger rail. The U.S. Bureau of Labor Statistics reported that 3.6 million employed individuals were unable to work at some point in January 2022 (when Omicron peaked) because of illness—more than twice as high as the pre-pandemic high. In the same month, 6 million individuals were unable to work because their employers closed or lost business due to COVID-19. Absences and loss of business because of illness have been consistently above average throughout the pandemic.

Supply chains are global, and a product can pass through several countries before reaching the United States. A delay or disruption in any one of those countries can therefore cause supply problems for theUnited States. Different countries have experienced different kinds of production disruptions, including lockdowns and other work restrictions, and at different times compared to the United States. The Federal Reserve Bank of New York publishes an index measuring how much pressure there is in global supply chains. For much of the pandemic, supply chains have faced significantly higher pressures than at any time in recent decades.."
Supply Disruptions