Omicron, worker shortage disrupts US manufacturing
Generac CEO says company forced to pass on rising costs to consumers amid booming demand
A generator manufacturer in Wisconsin is trying to balance more than 200 open positions and rising input costs as demand for its products continues to soar.
Generac Power Systems CEO Aaron Jagdfeld provided the insight during a live interview on "Varney & Co." and outlined the challenges his company has been faced with amid supply chain disruptions coupled with the "incredibly disruptive" surge in omicron cases, which he noted significantly interfered with the manufacturing process.
Jagdfeld said his absenteeism rate increased 15% for a period of time at the peak because his employees were either isolating due to contracting COVID-19 or getting exposed.
"Since the end of December to today it’s just been interrupting our operations pretty severely," he told FOX Business’s Grady Trimble, speaking from his factory in Whitewater.
Jagdfeld explained that he was able to navigate the situation by being "nimble" and "flexible."
He said he "moved a lot of people around" when possible, however noted that the situation limited how much the company could produce during that time.
Strong consumer demand for goods and continued port congestion in America as well as shortages of truck drivers and elevated global freight rates continue to hang over any supply chain recovery, the Wall Street Journal reported, citing executives and economists. On top of labor shortages, weather interruptions and raging omicron cases also threaten to clog up supply chains.
On Tuesday, American Trucking Associations President and CEO Chris Spear explained on "Mornings with Maria" the impact on the supply chain due to the "chronic shortage of talent," which has led to cargo sitting unused and unloaded at U.S. ports.
He also noted that now truckers are moving more with fewer people and "even less equipment in many instances."
"I think we are at the edge of a cliff right now," Spear told host Maria Bartiromo, noting that the trucking industry is "short 81,000 drivers."
Earlier this month it was revealed that the latest JOLTS report on job openings sits at 10.6 million in November after hitting a record 11.03 million the month before.
Jagdfeld noted that he had to increase worker wages in an attempt to retain the people currently employed at his company.
He said that because he is having to raise wages and is dealing with higher costs for materials as well as logistics, he has been forced to increase prices for his products.
INFLATION CALCULATOR: SEE HOW HIGHER PRICES ARE HITTING YOUR WALLET
"All of those costs are up for us, so prices have gone up," Jagdfeld stressed.
As a result of all the challenges presented, Jagdfeld warned on Thursday that inflation is "definitely" here to stay and is not transitory as the Federal Reserve initially claimed.
"I think we’ve been seeing this over the last year for what it is," he stressed. "I mean as wages go up, very rarely do wages come back down."
Jagdfeld provided the insight one week after it was revealed inflation rose at the fastest pace in nearly four decades in December, as rapid price gains fueled consumer fears about the economy.
The consumer price index rose 7% in December from a year ago, according to a new Labor Department report released last Wednesday, marking the fastest increase since June 1982, when inflation hit 7.1%. The CPI – which measures a bevy of goods ranging from gasoline and health care to groceries and rents – jumped 0.5% in the one-month period from November.
Economists expected the index to show that prices surged 7% in December from the year-ago period and 0.4% from the previous month.
President Biden on Thursday pointed to the Federal Reserve as holding the key responsibility for addressing soaring inflation in the U.S.
The president acknowledged during a White House media conference that rising prices are a problem for Americans and that "we need to get inflation under control," saying that the coronavirus pandemic "created a lot of economic complications, including rapid price increases across the world economy."
"So here's what we're going to do," Biden said. "A critical job in making sure that the elevated prices don't become entrenched rests with the Federal Reserve, which has a dual mandate: full employment and stable prices."
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Fed Chairman Jerome Powell has already signaled the U.S. central bank may speed up its withdrawal of pandemic support for the U.S. economy in order to combat inflation, which has been higher and longer-lasting than policymakers initially expected. That could mean the Fed's bond-buying program ends sooner than expected, potentially leading to a faster-than-expected interest rate hike.
"At this point, the economy is very strong, and inflationary pressures are high," Powell recently said while testifying on Capitol Hill. "It is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at our November meeting, perhaps a few months sooner."
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FOX Business’ Megan Henney and Breck Dumas contributed to this report.