A few quick market observations from dicussions I’ve had with portfolio companies over the past few weeks. All relate to just how a white hot economy has some downside effects on certain types of businesses. Certainly some early warning signs – curious if others out there are seeing the same.
My take-away is that in many sectors of the economy companies quite literally don’t need more customers. They can’t handle the additional load because they can’t hire fast enough and their supply chains are stretched thin. We’ve seen this in digital advertising for sure (and not just in travel and other segments that might be reacting to the Delta variant). Interestingly we’ve also seen a couple of companies – especially those that work with small businesses – whose message typically is: “We help you find and engage with customers more effectively.” The small businesses they target are pushing back and saying that they need more staff, not more customers. Currently, they’re running one, two, or even three-month waiting lists to provide services to their customers. We’ve all seen signs on restaurants that they’re closed or have reduced hours because of the unavailability of staffing. It’s interesting to consider the ramifications across the economy when many industries are at such capacity.
Obvious implications include things like inflation (and we’re certainly seeing some inflationary pressure) but beyond that, I think that the ripple effects are broader than we’re currently thinking about. I wanted to flag it as an unexpected but real consequence of such a hot economy. Certainly not something I remember seeing before (certainly not in this way).