Issue link: https://iconnect007.uberflip.com/i/1433652
DECEMBER 2021 I SMT007 MAGAZINE 69 of inventory relative to sales. In the current en- vironment, we have a couple weeks of inven- tory relative to sales. You can have a little bit of an overhang to restock those inventory levels and get them back to more normal, arguably healthy, levels. Matties: So, listening to everything you just said, you seem optimistic that 2022 will be a positive year for our industry. DuBravac: I'm cautiously optimistic, but I think there are tailwinds. If you look at durable goods, which is where our industry fits, that's up from pre-pandemic levels by nearly 20% to- day. Spending on services hasn't really recov- ered to pre-pandemic levels yet. Some of that will presumably settle out in 2022. We will see a pickup in spending on services. We see some headwinds against spending on durable goods as a result. Growth rates will be slower for the econo- my in 2022. We'll have presumably less stimu- lus than we have had since Spring 2020. Even considering the potential for the infrastruc- ture bill, you're going to have less stimulus to drive spending. We'll be more reliant on wage increases and business investment to drive growth. Businesses are showing a bit of uncer- tainty, and consumers are showing less confi- dence than they were pre-Delta variant. Here's an anecdotal example from a friend. His phone was dying, so he went to the carrier store to get a new one, but they weren't in stock. He got the bat- tery replaced instead, and now the phone is charging fine, so he isn't going to up- grade. He said, "Well, now it's charging fine, so I'll just use this phone a little longer." at happens in a lot of categories where we extend the durability of the product. You see it in cars, especially, where there is a high degree of dura- bility, and the life cycle can be long. Going back to my example with Apple, by their estimate they've lost over $12 billion in sales over the past six months. Some of that will materialize later in 2022. Maybe some of it is a missed opportunity, but some of it will re-materialize. As I said, there are some head- winds and tailwinds, but the overall environ- ment looks pretty good. Matties: e other impact, of course, is labor. Right now, there's obviously a shortage of la- bor. When you're looking at the market re- ports, how do you factor the labor into your thinking? DuBravac: If you look at IPC's newly released indices, the ability to hire skilled labor remains a major constraint and companies—at least over the next six months—so I don't anticipate that to improve. In fact, most firms say that will deteriorate over the next six months. My rough estimate is that we have nearly 120,000 open jobs in our industry in the U.S. Prices will go up for labor because they're going up in other places for labor. Manufactur- ers are competing against Amazon, Walmart, Starbucks, and everyone up the value chain, depending upon what type of job you're re- cruiting for. Matties: Many of those major companies are offering hiring bonuses and other incentives. DuBravac: Exactly. Both Am- azon and Walmart this year offered to pay higher educa- tion costs for some of their employees. Walmart an- nounced a couple months ago they were going to give half of their associates, about 750,000 people, a smart- phone to use while they're in the store but then also to use for their own personal use outside of the store. So, there are these fringe benefits together with real tangible ben efits.