A warehouse associate loads a pallet of goods | Source: Adobe Stock

It’s no secret that the entire supply chain for consumer goods — including toys and games — is facing challenges across the board.

One big issue, particularly here in the U.S., is labor. Job openings are waiting to be filled as many workers are holding out for higher wages and the result is a lack of workforce in the supply chain from docks and warehouses to trucking and rail. This week, National Retail Federation (NRF) Chief Economist Jack Kleinhenz expressed concern that employers’ struggle to fill open positions will fuel inflation in the months ahead as certain wages rise.

“Consumer spending is currently far above pre-pandemic levels thanks to unprecedented monetary and fiscal policies that have backstopped demand by putting money into wallets,” Kleinhenz says. “But as the economy moves forward into the later months of 2021, federal aid will be tapering off and there will be an important focus on the ability of the labor market to generate ongoing strength in wages and salaries to support spending. U.S. consumers remain in the mood to spend but the labor market and job creation will play an increasing role in their ability to do so.”

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According to this month’s issue of the NRF’s Monthly Economic Review, jobless claims are returning to pre-pandemic levels even though the number of Americans out of work is well above the pre-COVID-19 era. Labor costs spiked 3.2% in the 12 months ending in June while 10.07 million nonfarm job openings remained amid 9.48 million job seekers.

“The bulk of the recent upturn in U.S. inflation has been driven primarily by supply chain bottlenecks and low levels of inventories, but high labor costs are often passed on to consumers and are considered a precursor of broader inflation,” Kleinhenz adds. “We will be monitoring labor market developments intently to determine if expanded payrolls expected in the coming months will influence inflationary pressure, especially as wages and salaries increase.”

For the toy industry, business remains strong despite looming supply chain issues that could stifle growth in the fourth quarter alongside price increases across the board.