News and Analysis

Toy Company CEO Explains How High Inflation, Worker Shortages Are Slamming His Business

The chief executive of a leading American toy manufacturer foresees inflation lasting well into 2022.

During an interview with CNBC’s “Squawk Box,” John Gessert — who leads American Plastic Toys — believes that inflation is less transitory than Federal Reserve Chair Jerome Powell is willing to acknowledge.

“It’s not going to be transitory because … I can’t imagine going back to the people that have stuck with us and saying, ‘Okay, we’re going to take $1 out of your hourly wage.’ I just don’t see wage inflation retreating any time soon,” Gessert said.

Gessert’s business manufactures toys in Michigan and Mississippi; it is therefore enduring current supply chain bottlenecks hitting many other firms. However, American Plastic Toys is still deeply affected by labor shortages: “I couldn’t in good conscience accept additional orders when I had to really work and do everything I could possibly to satisfy the orders that we’d already booked … six months ago in some cases.”

“We have some loads that have been actually on the truck for almost a week waiting for logistic companies, transportation companies to turn those loads,” he continued.

Gessert — whose goods are sold in Big Lots, Dollar General, Dollar Tree, Walmart, Five Below, and other retailers — also noted that profits are constrained.

In recent months, other business leaders have expressed concerns about the economic phenomena challenging the United States economy.

Former Walmart CEO Bill Simon called the supply chain crisis a “mess from start to finish.” He told Fox Business that the crisis will not end “until we alleviate the labor shortage that’s out there and get people driving trucks and unloading at the docks and stocking shelves.”

Meanwhile, hedge fund manager Carl Icahn argued during a CNBC interview that “in the long run we are certainly going to hit the wall” due to high inflation. “I really think there will be a crisis the way we are going, the way we are printing money, the way we are going into inflation. If you look around you, you see inflation all around you, and I don’t know how you deal with that in the long term.”

Noting the combined negative effect of high inflation, tight supply chains, and labor shortages on consumer sentiment, some economists suspect that the United States economy is contracting. David Blanchflower of Dartmouth College and Alex Bryson of University College London write that “there are clear downward movements in consumer expectations in the last six months” — downward movements severe enough to “suggest the economy in the United States is entering recession now.”

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