Should Joe Biden Be Worried About Soaring Lumber Prices?

WASHINGTON – If a tree falls in a Canadian forest and a logger has to drive 16 hours to get it out, does that crush the US president‘s economic agenda?

This unlikely question may be on the minds of some in Washington as soaring prices from lumber to used cars and corn seed emerged as worrying signs of the post-pandemic economic boom, President Joe Biden and Congress Democrats are counting to keep them in power.

Consumer demand is increasing as some Covid-19 restrictions fall. But the supply chain has struggled to keep up, pushing prices up and leading to shortages.

Government data for April showed disappointing job growth and an unexpected rise in consumer prices. Commodities like copper and iron ore are at record levels; gas prices are above $ 3 a gallon, and analysts have warned of gas shortages even before the extended shutdown in the last few days of a key pipeline; and the scarcity of computer chips has forced manufacturers to stop production of cars, appliances and more.

Add it all up and some economists, like Clinton Administration Secretary of the Treasury Larry Summers, fear the country is on the verge of its first real bout of rapid inflation since the 1970s, when soaring costs hit the ground running. undermined the value of citizens’ wages and savings – and helped bring down President Jimmy Carter.

“Inflation is the kryptonite of US politics,” Democratic strategist Chris Kofinis said. “It doesn’t matter which party you are from. It destroys you.”

So far, the price increases mainly concern specific industries. This month, lumber hit a record high of $ 1,686 per thousand board feet, after jumping 406% from the $ 333 per thousand board feet it traded at the same time a year ago. and 438% from its price five years ago.

As the country comes out of the woods of the pandemic, it is running out of wood. Prices have tripled and some manufacturers are struggling to find them. Low plywood is so valuable that workers keep it locked up after a series of thefts.

In the forests of British Columbia, which supplies much of America’s two-by-fours, lumberjack Chace Barber has fueled the seemingly insatiable demand by driving until 4 p.m. to fetch logs he wouldn’t have. not even bothered when the prices were lower.

“I can’t find a log trailer anywhere for sale. I have two trucks that I want to transport, and I can’t find a trailer anywhere. You talk to the manufacturer and they say a year and a half ago – a half wait, ”he says. “And you can’t find logging truck drivers. Anyone who can and wants to drive a logging truck already drives a logging truck.

A customer loads lumber at a Home Depot store in Pleasanton, Calif., On February 22.David Paul Morris / Bloomberg via Getty Images File

Barber, who has become somewhat of a lumber influencer with over 300,000 followers on TikTok, has seen a resurgence of interest in the industry, with increasing numbers asking him how to get in, even though he warns that the windfall of wood is not. It doesn’t really affect workers.

At the other end of the supply chain, builders have faced rising costs and unreliable supplies that they say now add up to $ 36,000 to the price of a new home.

House prices were already on the rise due to a long-standing housing shortage – there are fewer homes for sale now than there have been in decades – and in addition to lumber, items like garage doors, insulation, and windows have also increased or are underway with orders waiting for several weeks as manufacturers meet booming demand

“The point is, if this continues, you will see the homebuilding industry slow down and stop,” said Jerry Howard, CEO of the National Home Builders Association, who said housing is often a problem. leading indicator of economic health. “This problem with the costs of lumber and other building materials is sort of a perfect new potential housing storm that will lead us into a recession.”

The unprecedented surge in lumber prices can be attributed to a number of issues unique to the industry.

Construction never really recovered from the Great Recession over a decade ago, so the supply chain has reduced capacity. Add a beetle infestation in British Columbia, sales by European growers to China, and the tariffs former President Donald Trump applied to Canadian lumber.

Then, at the onset of the pandemic, timber producers reduced production on the basis of what turned out to be a flawed assumption that construction would stop along with the rest of the economy. Instead, consumers stuck in their homes went on a renovation spree, while others decided to move to new homes because they were free to work remotely.

Jared Feltman puts wood on a forklift at Adams Lumber Co. in Centennial, Colo. On May 4.Hyoung Chang / Denver Post via Getty Images File

“Covid added extra fuel to an already existing hell,” said Thom Rafferty, a commodities trader at Millbrook Lumber Inc. outside of Boston. “It has nothing to do with inflation.”

At a congressional hearing this month, Commerce Secretary Gina Raimondo said she would make timber prices a top priority.

Builders and others want Biden to eliminate Trump’s tariff on Canadian lumber, which was cut from 20% to 9% in the final months of his presidency.

“The reality is that record lumber prices are putting the American dream of homeownership beyond reach for hundreds of thousands of potential buyers,” Senator Jerry Moran, R-Kan, told Senate Weekly. last. “It’s the American buyers, not the Canadian lumber producers, who end up paying the price.”

For now, most economists, including those at the Federal Reserve, believe the price hikes are just temporary quirks of restarting its idling engines.

Like the great toilet paper shortage of 2020, they’re hoping it comes and goes without really meaning anything bigger. But no one knows for sure, and so many economic impacts from Covid-19 have been unpredictable.

“We have had a very unusual impact on our economy,” Treasury Secretary Janet Yellen told reporters at the White House this month. “Getting an economy back on track, trying to get it back on track after a pandemic in which there are a lot of supply bottlenecks, is going to be, I think, a bumpy process.”

Biden is counting on a robust economic recovery to keep his popularity and his agenda alive as he tries to push through his massive infrastructure package, which would be partly funded by tax hikes. And Democrats in both houses of Congress hope a strong economy will help them retain their slim majority in next year’s election by overcoming the historic trend in which a presidential party typically loses seats in the first half of the year.

But Republicans have already sought to get rid of rising costs to argue against Biden’s infrastructure plan.

“You watch food costs go up. You watch housing costs, wood costs. There is inflation everywhere,” Minority House Leader Kevin McCarthy, R-Calif., Said after a meeting with Biden at the White House Wednesday. “So raising taxes would be the biggest mistake you could make.”

Meanwhile, some, like 38-year-old Melissa Miller of Saginaw, Mich., Are already feeling pinched at the grocery store.

“Food prices are going to kill us,” she said. “It’s do or die.”

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