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Labor Shortages And Inflation Are Affecting Everyone – But In Different Ways Than You May Think

It’s no secret that jobs have been hard to fill and that an employee shortage is having a significant impact on the economy. Additionally, the COVID-19 pandemic has disrupted public...

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This story originally appeared on ValueWalk

It's no secret that jobs have been hard to fill and that an employee shortage is having a significant impact on the economy. Additionally, the COVID-19 pandemic has disrupted public health and created economic disorder on a global scale. Because of this, businesses worldwide are experiencing supply chain disruptions and labor shortages, while consumers are dealing with the aftermath of inflation.

alcangel144 / Pixabay - Valuewalk

Q3 2021 hedge fund letters, conferences and more

There are 8.6 million potential employable workers and 10 million job openings in the U.S. today, reflecting the strong decrease in workforce participation that contributes to the ongoing supply chain disruptions impacting many industries, including suppliers, distributors, and consumers, with the most significant impact on consumers and the economic growth. For example, American Airlines canceled more than 460 flights earlier in November due to staffing shortages that led to travel disruptions for tens of thousands of people. Unfortunately, the labor shortages and supply chain issues also impact inflation and will only worsen before it gets better.

These labor shortages and supply chain disruptions have created a destructive cyclical effect. Fewer employees result in fewer goods produced. As fewer goods are available with higher demand, prices rise, which has caused inflation to hit a 31-year high with no signs of abating anytime soon.

While it's easy to think that these realities impact everyone similarly, some companies persevere through these times, and consumers notice. At the same time, many other companies struggle to adapt, and the volume of social and media activity around these issues demonstrates consumer frustrations. So, which companies are performing well, and which aren't? And how can you quantify the difference?

Using AI And NLP To Analyze Data And Calculate Sentiment

Using artificial intelligence (AI) and natural language processing (NLP), financial services firms can quickly pull data from several sources, like news, social media reports, financial reports, and third-party data providers. AI and NLP can analyze the information gathered from these sources and rank the sentiment of the data with either a negative, neutral or positive sentiment score.

At Accern, we’ve created a no-code AI platform that allows financial organizations to extract sentiment and insights from textual data for better risk and investment decisions. We recently analyzed the impact of labor shortages and inflation on companies and consumers. After gathering data on the companies most impacted, we analyzed the human emotion behind the news and issued a sentiment score for each piece of information pulled.

Insights On Labor Shortages

There are a few companies experiencing outsized negative sentiment among consumers, including Yum! Brands, Spirit Airlines, American Airlines, Ulta Beauty, Foot Locker, and Delta Airlines, to name a few. The most significant issues impacting these companies include airline labor shortages, food shortages, truck driver shortages, and supply chain disruptions. Additionally, restaurant employees and drivers are speaking out against low wages and harsh working conditions. To put things in perspective, roughly half of the news activity around these companies embodies a negative sentiment.

Labor Shortages And Inflation

Considering the lack of truck drivers, more drivers are voicing negative points of view around uncomfortable working conditions and resigning as shown in the snippets pulled from the dashboard above. The shortage of drivers has created a rift within the global economy and exacerbated the supply chain crisis as stores do not receive their goods in time to fill the empty shelves and meet shoppers' demands.

Especially with holiday shopping, panicked consumers are experiencing the impact of the supply chain disruption and labor shortages. Stores like Ulta and Foot Locker, which have not fully adapted to the supply chain problems, are not only reporting lower earnings but are dealing with negative sentiment from the media, investors, and consumers.

Although Ulta and Foot Locker expected higher growth once physical stores reopened, investors were disappointed to see the earnings for each store drop. As consumers have stuck to the pandemic habits of online shopping, they now look for convenience and digital experiences more than ever. Although Ulta and Foot Locker are doing their best to ensure that these digital experiences are available to consumers as fast as possible, there is still a long way to go.

Conversely, companies like Anheuser Busch, Pepsi, Coca-Cola, and JetBlue are seeing outsized positive attention despite the same labor shortages and supply chain disruption trends. The difference lies in increasing employee benefits and providing better digital experiences to consumers, leading to higher earnings reports. For example, PepsiCo’s response to the supply chain crisis was to digitize the supply chain and invest in technological innovation at scale to ensure that consumers all across the globe receive their products.

Pepsi's response has generated positive sentiment from the news and consumers around the world. Consumers are happiest when brands meet their demands, act ethically, and innovate their services and products. Innovation is critical in keeping consumers interested in products as it shows that companies are adapting to new technologies to meet their consumers' needs.

Insights On Inflation

The supply chain and labor shortage crises are driving inflation. In the most recent CPI report, inflation came in at 6.2 percent, marking the highest increase in over 30 years. But companies that have navigated well around supply chain disruptions and labor shortages have also proven their ability to minimize the impact of inflation.

Our recent analysis shows that companies like Discover, Peloton, Nike, and Capital One are receiving negative sentiment from consumers, while JB Hunt, American Express, Starbucks, and Costco are not drawing the ire of their customers.

Nike is one company that has used digital acceleration to adapt during the pandemic and saw consumer demand rise as profits rose 16 percent in the last year. Despite its revenue growth, supply chain issues also inflate cotton prices and disrupt the flow of products to stores. As a result, Nike announced that it anticipates increasing prices in the second half of 2022 to offset supply chain-related costs.

Labor Shortages And Inflation

Contrarily, Costco is navigating higher labor and freight costs, transportation demand, and container shortages. Still, they manage to keep their prices low and membership fees the same while meeting the needs of consumers. Additionally, Costco acquired a logistic network to enable the company to deliver large items within days instead of weeks and has gone digital with e-commerce platforms like Instacart.

Labor Shortages And Inflation

These AI-generated insights demonstrate how certain companies are effectively navigating the most prominent issues affecting our economy today. Accern's AI and NLP analysis reveals that companies proactively innovating their products and services can meet consumers' demands without significantly cutting employee salaries or raising costs. These companies are the ones that are also driving positive sentiment from the media and consumers.

With the amount of structured and unstructured data available today, AI and NLP are crucial in understanding the relative health of companies and how different players in the economy are handling challenges – and staying afloat.

Article By Kumesh Aroomoogan, co-founder and CEO, Accern


About Kumesh Aroomoogan

Kumesh Aroomoogan is the co-founder and CEO of Accern, a New York-based, venture-backed AI startup. Founded in 2014, Accern accelerates AI workflows for financial enterprises with a no-code development platform and has raised $16m to date. In 2018 Kumesh was named to the Forbes 30 Under 30 Enterprise Technology list. Previously, he was the co-founder and CEO of BrandingScholars, an advertising agency, a General Accountant at the Ford Foundation, an Executive Board Member, Chairman of Public Relations at ALPFA, Equity Researcher at Citigroup, and a Financial Analyst at SIFMA.